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Ambiguity in Performance Pay: An Online Experiment

Author

Listed:
  • David Johnson

    (University of Calgary)

  • David Cooper

Abstract

Many incentive plans are inherently ambiguous, lacking an explicit mapping between performance and compensation. Using an online labor market, Amazon Mechanical Turk, we study the effect of ambiguity on willingness to accept contracts to do a real-effort task as well as completion and performance of this task. Ambiguity about the relationship between performance and compensation affects the willingness of individuals to accept contracts and the likelihood of quitting before completion, but not performance. These effects are non-monotonic in the level of ambiguity. Information about ability at the task reduces willingness to accept and increases quitting, but does not affect performance.

Suggested Citation

  • David Johnson & David Cooper, "undated". "Ambiguity in Performance Pay: An Online Experiment," Working Papers 2014-83, Department of Economics, University of Calgary, revised 10 Nov 2014.
    • Handle: RePEc:clg:wpaper:2014-83
    as

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    Citations

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    Cited by:

    1. Jim Engle-Warnick & Sonia Laszlo, 2017. "Learning-by-doing in an ambiguous environment," Journal of Risk and Uncertainty, Springer, vol. 55(1), pages 71-94, August.
    2. Maselli,Ilaria & Fabo, Brian, 2015. "Digital workers by design? An example from the on-demand economy," CEPS Papers 11030, Centre for European Policy Studies.
    3. Oechssler, Jörg & Roomets, Alex, 2015. "A test of mechanical ambiguity," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 153-162.
    4. David B. Johnson & Matthew D. Webb, 2016. "Decision Making with Risky, Rival Outcomes: Theory and Evidence," Carleton Economic Papers 16-12, Carleton University, Department of Economics.
    5. David Johnson & Sebastian Goerg & Jonathan Rogers, "undated". "Can't Touch This! Similarity And Willingness to Keep "Dirty Money"," Working Papers 2014-81, Department of Economics, University of Calgary, revised 10 Nov 2014.
    6. David Blake Johnson, 2016. "(Please Don't) Say It to My Face! The Interaction of Feedback and Distance: Experiments with Vulgar Language," Kyklos, Wiley Blackwell, vol. 69(2), pages 336-368, May.

    More about this item

    Keywords

    ambiguity; incentives; performance pay; quitting; online experiment;
    All these keywords.

    JEL classification:

    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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