Incentive and Signaling Effects of Bonus Payments: An Experiment in a Company

Deversi, Marvin; Spantig, Lisa

doi:10.2139/ssrn.4380963

Cited by 1 publication

(1 citation statement)

References 31 publications

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“…In a similar vein, responsibility attribution seems to be a type of retrospective judgment that is sensitive to causal reasoning-understanding who and what led to the success or failure (Gerstenberg, 2022;Gerstenberg et al, 2015;Langenhoff et al, 2021;Gerstenberg and Lagnado, 2010)-and reflects who we think is a better partner (such as more competent and more willing to exert effort in the current setup, or more wealthy and fair in Raihani and Barclay, 2016). By contrast, bonus allocation seem to be a type of prospective judgment, based primarily on how to motivate partners to contribute more in the future (Lazear, 2000;Chung et al, 2014;Joseph and Kalwani, 1998;Deversi and Spantig, 2023). Responsibility attributions and bonus allocations might thus reflect two different kinds of judgment: The former situates the agent in the event and considers both the agent's behavior and the environment (e.g., other agents' behavior; Zultan et al, 2012;Xiang et al, 2023a), whereas the latter cares about how to motivate the agent to do the best they can (Bun and Huberts, 2018).…”

Section: Discussionmentioning

confidence: 99%

People reward others based on their willingness to exert effort

Xiang,

Landy,

Cushman

et al. 2024

Preprint

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Individual contributors to a collaborative task are often rewarded for going above and beyond—salespeople earn commissions, athletes earn performance bonuses, and companies award special parking spots to their employee of the month. How do we decide when to reward collaborators, and are these decisions closely aligned with how responsible they were for the outcome of a collaboration? In Experiments 1a and 1b (𝑁 = 360), we tested how participants give bonuses, using stimuli and an experiment design that has previously been used to elicit responsibility judgments (Xiang et al., 2023a). Past work has found that responsibility judgments are driven both by how much effort people actually contributed and how much they could have contributed (Xiang et al., 2023a). In contrast, here we found that participants allocated bonuses based only on how much effort agents actually contributed. In Experiments 2a and 2b (𝑁 = 358), participants allocated bonuses to agents who were instructed to exert a particular level of effort; participants rewarded these agents more for complying with instructions, and their rewards were less sensitive to the precise level of effort exerted. Together, these findings suggest that people reward collaborators based on their willingness to exert effort, and point to a difference between decisions about how to assign responsibility to collaborators and how to incentivize them. One possible explanation for this difference is that responsibility judgments may reflect causal inference about past collaborations, whereas providing incentives may motivate collaborators to keep exerting effort in the future. Our work sheds light on how we understand and formalize the cognitive capacities that underlie collaboration.

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