The Impact of Feedback Distribution and Performance-Contingent Bonuses on Learning and Performance.

Abstract

This study investigates how the distribution of cognitive feedback interacts with bonus incentives in an environment with incomplete information. We experimentally examine how identical feedback influences performance when it is either provided evenly distributed throughout a task, or distributed early at the beginning of the task, and whether the effect is moderated by the presence of a performance-contingent bonus. We predict and find that evenly distributed feedback produces higher performance when there is no bonus. However, when a bonus is offered, identical feedback distributed early is more effective. Additional tests reveal that without a bonus, feedback distributed early leads to cognitive overload, and consequently lowers performance. However, when a bonus is provided, workers take a more active approach to learning and spend more time trying to understand the feedback, which leads to higher performance. This study adds to the growing body of accounting studies on the effects of feedback distribution on performance. Importantly it highlights that performance-contingent incentives can influence the effectiveness of feedback.