Agents’ decisions to exert effort depend on the incentives and the potential costs involved. So far, most of the attention has been on the incentive side. However, our laboratory experiments underline that both the incentive and the cost side can be used separately to shape work performance. In our experiment, subjects work on a real-effort slider task. Between treatments, we vary the incentive scheme used for compensating workers. Additionally, by varying the available outside options, we explore the role of implicit costs of effort in determining workers’ performance. We observe that incentive contracts and implicit costs interact in a nontrivial manner. In general, performance decreases as implicit costs increase. Yet the magnitude of the reaction differs across incentive schemes and across the offered outside options, which, in turn, alters estimated output elasticities. In addition, comparisons between incentive schemes crucially depend on the implicit costs. This paper was accepted by Yan Chen, decision analysis.

This paper studies how the presence of peers and different peer assignment rules—self-selection versus random assignment—affect individual performance. Using a framed field experiment, we find that the presence of a randomly assigned peer improves performance by 28% of a standard deviation (SD), whereas self-selecting peers induces an additional 15%–18% SD improvement in performance. Our results document peer effects in multiple characteristics and show that self-selection changes these characteristics. However, a decomposition reveals that variations in the peer composition contribute only little to the performance differences across peer assignment rules. Rather, we find that self-selection has a direct effect on performance. This paper was accepted by Yan Chen, decision analysis.

This paper investigates how incentives and behavioral policy interventions affect individuals’ allocation of scarce cognitive resources. Based on experimental evidence, we demonstrate that incentives systematically influence individuals’ allocation of cognitive resources, and their propensity to actively engage with a decision or to stay passive. Policies that steer individuals’ attention to a specific decision lead to more active decision-making and better choices in the targeted choice domain, but induce negative cognitive spillovers on the quality of choices in other domains. In our setting, these two countervailing effects offset each other, such that the overall payoff consequences of the interventions are essentially zero. We further document that cognitive spillovers are especially pronounced for complex choices and for subgroups of the population with a smaller stock of cognitive resources. We discuss implications for the design and evaluation of behavioral policy interventions.

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