蝌蚪网 Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Incentive Schemes, Sorting, and Behavioral Biases of Employees: Experimental Evidence
蝌蚪网 Journal: Microeconomics
(pp. 184–214)
Abstract
We investigate how the convexity of a firm's incentives interacts with worker overconfidence to affect sorting decisions and performance. We demonstrate, experimentally, that overconfident employees are more likely to sort into a nonlinear incentive scheme over a linear one, even though this reduces pay for many subjects and despite the presence of clear feedback. Additionally, the linear scheme attracts demotivated, underconfident workers who perform below their ability. Our findings suggest that firms may design incentive schemes that adapt to the behavioral biases of employees to "sort in" ("sort away") attractive (unattractive) employees; such schemes may also reduce a firm's wage bill. (JEL D03, D83, J24, J31, M12)Citation
Larkin, Ian, and Stephen Leider. 2012. "Incentive Schemes, Sorting, and Behavioral Biases of Employees: Experimental Evidence." 蝌蚪网 Journal: Microeconomics 4 (2): 184–214. DOI: 10.1257/mic.4.2.184Additional Materials
JEL Classification
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- M12 Personnel Management; Executive Compensation