Theory of Incentives

Risk Preferences and Aging: The “Certainty Effect” in Older Adults’ Decision Making

by Nina Mazar

Cp-authored with Mara Mather, Marissa A. Gorlick, Nichole R. Lighthall, Jessica Burgeno, Andrej Schoeke, and Dan Ariely, conditional accept at 'Psychology and Aging'

A prevalent stereotype is that people become less risk taking and more cautious as they get older. However, in... more A prevalent stereotype is that people become less risk taking and more cautious as they get older. However, in laboratory studies, findings are mixed and often reveal no age differences. In the current series of experiments, we examined whether age differences in risk seeking are more likely to emerge when choices include a certain option (a sure gain or a sure loss). In four experiments, we found that age differences in risk preferences only emerged when participants were offered a choice between a risky and a certain gamble but not when offered two risky gambles. In particular, Experiments 1 and 2 included only gambles about potential gains. Here, compared with younger adults, older adults preferred a certain gain over a chance to win a larger gain and thus, exhibited more risk aversion in the domain of gains. But in Experiments 3 and 4, when offered the chance to take a small sure loss rather than risking a larger loss, older adults generally exhibited more risk seeking in the domain of losses than younger adults. In a nutshell, our findings suggest that older adults weigh certainty more heavily than younger adults.

Performance incentives and job motivation factors among mental health professionals: a qualitative study

by ILIAS GRAMMATIKOPOULOS

Presented as a poster at the "2nd International Congress on Neurobiology, Psychopharmacology and Treatment Guidance"

Background
In our era of resource shortages, the lack of explicit policies for human resource management has... more Background
In our era of resource shortages, the lack of explicit policies for human resource management has produced imbalances that threaten the capacity of health care systems to attain their objectives[1]. The aim of this study was to identify important motivational factors according to the views of mental health professionals in two Greek psychiatric hospitals and particularly to determine if these might differ among medical, nursing and administrative stuff in terms of improving work performance.

Methods
A previously developed and validated instrument addressing four work-related motivators (job attributes, remuneration, co-workers and achievements) was used[2]. Three categories of health care professionals, doctors (N=28), nurses (N=224) and office workers (N=72) working in two psychiatric hospitals (Thessaloniki and Corfu) participated, and motivation was compared across socio-demographic and occupational variables.

Results
The survey revealed that achievements were ranked first for the entire sample and by professional subgroup (P < 0.001) among the four main motivators, followed by remuneration, co-workers, and job attributes. Interestingly, remuneration (and salary in particular) was reported as a significant incentive only for professionals in managerial positions (P = 0.032) for the entire sample. The range of reported motivational factors was mixed and within subgroups motivators were varied. The job-attributes and co-workers factor was a significant motivational predictor for nurses in managerial positions, while the most important determining variable in the achievements factor was education, which was positively associated with higher motivation for the entire sample (P = 0.034). 

Conclusion
In today's economically unstable environment, both monetary and non-monetary incentives are important to motivate health care professionals [3, 4] focusing the attention to management approaches that improve performance, while the economic downturn may present as a specific opportunity for radical innovation within the mental health system[5]. Mental health care professionals tend to be motivated more by intrinsic factors, implying that this should be a target for effective employee motivation, particularly in the public sector.

Large Stakes and Big Mistakes

by Nina Mazar

Co-authored with Dan Ariely, Uri Gneezy, and George Loewenstein in "Review of Economic Studies", 2009, 76 (2), 451-469.

Authors in alphabetical order.

Workers in a wide variety of jobs are paid based on performance, which is commonly seen as en- hancing effort and... more Workers in a wide variety of jobs are paid based on performance, which is commonly seen as en- hancing effort and productivity relative to non-contingent pay schemes. However, psychological research suggests that excessive rewards can, in some cases, result in a decline in performance. To test whether very high monetary rewards can decrease performance, we conducted a set of experiments in the U.S. and in India in which subjects worked on different tasks and received performance-contingent payments that varied in amount from small to very large relative to their typical levels of pay. With some important exceptions, very high reward levels had a detrimental effect on performance.

The Hidden Perils of Career Concerns in R&D Organizations

by Enno Siemsen

Published in Management Science, 2008.

This research examines how certain economic incentives can lead agents to prefer difficult solutions to their... more This research examines how certain economic incentives can lead agents to prefer difficult solutions to their organizational tasks that reduce their likelihood of obtaining a successful task outcome. Drawing on the career concerns literature, I model a decision context in which agents have the operational autonomy to choose among different solutions. Analyzing this model reveals that agents with career concerns will, under certain conditions, deliberately reduce their likelihood of succeeding with task by choosing a solution that makes their task more difficult. These findings suggest that highly capable agents prefer moderately difficult tasks to showcase their capability, while less-capable agents prefer highly difficult tasks to mask their lack of capability. The robustness of these results is examined in various extensions. Furthermore, the paper provides insights on how incentives can be designed to alleviate this problem.

Incentives That Induce Task-Related Effort, Helping, and Knowledge Sharing in Workgroups

by Enno Siemsen

Co-authored with Sridhar Balasubramanian and Aleda Roth. Published in Management Science, 2007.

Cooperation and coordination among employees can yield significant productivity gains. In this study, we explore the... more Cooperation and coordination among employees can yield significant productivity gains. In this study, we explore the design of optimal incentive systems that induce task-related effort, helping, and knowledge sharing within workgroups. We identify three distinct types of employee linkages that must be accommodated in the design of effective incentive systems: (1) outcome linkages, whereby the outcome of one employee’s task is influenced by that of another; (2) help linkages, whereby each employee can directly expend effort on helping another; and (3) knowledge linkages, whereby each employee can share job-related knowledge with another. We analytically investigate the effect of each type of employee linkage, and some combinations of these linkages, on the optimal design of incentive systems. Our analytical results demonstrate how, by optimally weighting individual-level and workgroup-level incentives, managers can balance the need to induce cooperation and coordination among employees and the need to manage employees’ incentive-related risk. Counter to conventional wisdom, we also demonstrate that both group and individual incentives are necessary to facilitate cooperative behaviors such as knowledge sharing in workgroups. Further, we empirically test some of the insights developed from the analytical models; our empirical findings support these analytical results.

Why Genius Leads to Adversity: Experimental Evidence on the Reputational Effects of Task Difficulty Choices

by Enno Siemsen

Co-authored with Elena Katok, forthcoming in Management Science

We use a behavioral laboratory experiment to study how agents with reputation concerns select the difficulty of their... more We use a behavioral laboratory experiment to study how agents with reputation concerns select the difficulty of their tasks. Drawing upon existing theory, we subjected participants in our study to a context in which they had to convince a principal of their capability to reap financial benefits. Our results show that participants tended to increase the difficulty of their task to enhance their reputation. In addition, we provide evidence that
performance rewards reduce a less capable agent’s tendency to choose a more difficult task, whereas a highly capable agent’s pattern of choices is unaffected by performance rewards. Although the productivity of agents in our experiment therefore decreased if they had to convince a principal of their capability, we show that these detrimental performance implications can to some degree be overcome for less capable agents through performance rewards or by ensuring that the principal can interpret the agent’s choice.

Ethics and Incentive Programs

by Patrice Natalie Delevante

BUS 520: Leadership and Organizational Behavior

Organizational pressure to create and award a fixed and desired, quantitative work outcome from workers with ability... more Organizational pressure to create and award a fixed and desired, quantitative work outcome from workers with ability and motivation (i.e. high performance) can increase errors in the implementation of performance based incentives programs. Management and leaders hint and advocate with mission statements the importance that managers and leaders practice high performance work with good ethics and commitment expectancy to receive organization incentive programs with motivation.  Management with internal and external pressures to find a level of learned competency in workers at the training state that can lead to workers’ promotion to management (and hence improving the company’s management quota and retention of workers) can cause management to overlook and recognize unethical practices of high performance workers.  Unethical behaviors could be lateness in accomplishing organizational goals, lack of motivation in team meetings and low individual performance output and management reviews.  In SAS where workers competency in documentation and sales increases the company’s reputation and sales preference in top companies, leaders can condition themselves due to internal organizational pressures to compete and merge, to unintentionally award company incentives and increase salaries to unethical  behaviors mistaken for good work ethics and high motivation.  Leaders could be stressed and overwhelmed in their individual work outcomes and in an attempt to keep organizational individual and diversity competency, award incentives to company’s teams and workers with low levels of motivational team goals and feelings of low work outcomes expectancy. 

The Social Psychological Effects of Feedback on the Production of Internet Information Pools

by Coye Cheshire

Cheshire, Coye and Judd Antin. 2008. "The Social Psychological Effects of Feedback on the Production of Internet Information Pools." Vol 13, Issue 3. Journal of Computer-Mediated Communication.