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The Effects of Betrayal Aversion on Effort Provision When Incentives Are Fragile

Author

Listed:
  • Volker Benndorf

    (Department of Economics, Goethe-Universität Frankfurt, 60323 Frankfurt am Main, Germany)

  • Stephan Müller

    (Department of Economics, Platz der Göttinger, 37073 Göttingen, Germany)

  • Holger A. Rau

    (Department of Economics, Platz der Göttinger, 37073 Göttingen, Germany)

Abstract

This paper studies the impact of betrayal aversion on employees’ effort provision in exchange for a bonus payment that is at the employers’ expense and discretion. In our first study, using a laboratory experiment, we find that the performance of an employee with average betrayal aversion is lower by more than 15% relative to betrayal-neutral employees. Inspired by the findings, we theoretically identify a tradeoff for the effort provision of betrayal-averse employees. That is, higher effort not only increases the level of betrayal when the bonus is not paid, but it also increases the chances to receive a bonus avoiding betrayal. In a second study, we confirm our findings in an online labor market. The data also find support for the identified tradeoff. In a third study, we manipulate employees’ beliefs about the chances of receiving the bonus to provide causal evidence for the tradeoff.

Suggested Citation

  • Volker Benndorf & Stephan Müller & Holger A. Rau, 2024. "The Effects of Betrayal Aversion on Effort Provision When Incentives Are Fragile," Management Science, INFORMS, vol. 70(11), pages 7750-7769, November.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:11:p:7750-7769
    DOI: 10.1287/mnsc.2021.02405
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