Pay Enough - Or Don't Pay at All

Abstract: Economics seems largely based on the assumption that monetary incentives improve performance. By contrast, a large literature in psychology, including a rich tradition of experimental work, claims just the opposite. In this paper we present and discuss a set of experiments designed to test the effect of different monetary compensations on performance. In our experiments we find that whenever money is offered, a larger amount yields a higher performance. It is not true, however, that offering money always induces a higher performance: participants who were offered a small payoff gave a worse performance than those who were offered no compensation at all. These results suggest that the behavior of participants is influenced by their perception of the contract that is offered to them. When the contract offers money the environment is perceived as monetary, and participants respond in a qualitatively different way in monetary and non-monetary environments. In a different set of experiments we test subjects who, acting as principals, have to provide the appropriate incentive to agents. We show that principals do not anticipate the drastic difference in behavior. The vast majority of principals seem to think incorrectly that a larger compensation is unambiguously a better incentive.Monetary incentives;performance;motivation;principal-agent

Trust and discrimination in a segmented society: An experimental approach

discrimination;trust

Price competition and market concentration: An experimental study

price competition;industrial concentration

An experiment on risk taking and evaluation periods

investment;risk

Strategic delegation: An experiment

delegation;game theory

Presents or investments? An experimental analysis

commodities;investment;experimental design;game theory

Discrimination and nepotism: the efficiency of the anonymity rule.

The paper considers two categories of discrimination: 'discrimination against' and 'discrimination in favor', which Becker coins 'nepotism'. The paper develops an experimental test to distinguish between these two types of discrimination. The experiment compares the behavior towards individuals of different groups with the behavior towards anonymous individuals (those having no clear group affiliation). We illustrate the two attitudes by considering two segmented societies: Belgian society, with its linguistic segmentation between the Flemish and the Walloons, and Israeli society, where we focus on religious versus secular segmentation. In Belgium, we find evidence of discrimination against. Both the Walloons and the Flemish treat people of their own group in the same way as anonymous individuals while discriminating against individuals of the other group. In contrast, the behavior of ultra-orthodox religious Jews in Israel can be categorized as nepotism: they favor members of their own group while treating anonymous individuals in the same way as secular individuals. The distinction between the different types of discrimination is important in evaluating the effectiveness and the efficiency consequences of anti-discriminatory legislations.Discrimination; Efficiency; Effectiveness; Legislation;