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You Will not Regret it: On the Practice of Randomized Incentives

Author

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  • Brice Corgnet

    (emlyon business school, GATE UMR 5824, F-69130 Ecully, France)

  • Roberto Hernán González

    (CEREN EA 7477, Burgundy School of Business, Université Bourgogne Franche-Comté, Dijon, France)

Abstract

Scholars have long emphasized the importance of setting specific goals and providing clear expectations as a key driver of work performance. Yet, a casual observation of actual compensation practices suggests otherwise. Using both lab and field experiments, we show that randomization of bonus targets and piece rates can lead to higher performance than the best-available deterministic scheme. Furthermore, this effect can be sustained over time. We show that part of this effect is explained by regret motives, which lead workers to exert extra effort to avoid missing out on potential pay.

Suggested Citation

  • Brice Corgnet & Roberto Hernán González, 2023. "You Will not Regret it: On the Practice of Randomized Incentives," Working Papers 2314, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:2314
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    More about this item

    Keywords

    Randomized incentives; bonuses and piece rates; regret; experiments;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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