Pay Enough or Don't Pay at All*
Abstract
Economists usually assume that monetary incentives improve performance, and psychologists claim that the opposite may happen. We present and discuss a set of experiments designed to test these contrasting claims. We found that the effect of monetary compensation on performance was not monotonic. In the treatments in which money was offered, a larger amount yielded a higher performance. However, offering money did not always produce an improvement: subjects who were offered monetary incentives performed more poorly than those who were offered no compensation. Several possible interpretations of the results are discussed.
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Financial rewards can weaken or even reverse the behaviors' social signals, because rewards may create doubt about why the person engaged in the action and decrease both motivation and actual behavior.
“Financial rewards can weaken or even reverse the behaviors ' social signals, because rewards may create doubt about why the person engaged in the action and decrease both motivation and actual behavior (Gneezy and Rustichini 2000).”
From Unintended reward costs: the effectiveness of customer referral reward programs for innovative products and services (2019) · cites this paper as Gneezy and Rustichini 2000
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Cause Marketing Effectiveness and the Moderating Role of Price Discounts
Andrews, M., Luo, X., Fang, Z., & Jaakko Aspara, A. (2014) · Journal of Marketing · doi:10.1509/jm.14.0003 · Cited by 246 · see citing works
Do Incentive Contracts Crowd Out Voluntary Cooperation?Preprint
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Waste prevention and social preferences: the role of intrinsic and extrinsic motivations
Cecere, G., Mancinelli, S., & Mazzanti, M. (2014) · Ecological Economics · doi:10.1016/j.ecolecon.2014.07.007 · Cited by 242 · see citing works
Lab labor: What can labor economists learn from the lab
Kuhn, P., & Charness, G. B. (2011) · Cited by 242 · see citing works
Garbers, Y., & Konradt, U. (2013) · Journal of Occupational and Organizational Psychology · doi:10.1111/joop.12039 · Cited by 239 · see citing works
You’ve Got Mail: A Randomized Field Experiment on Tax Evasion
Bott, K. M., Cappelen, A. W., Sørensen, E. Ø., & Tungodden, B. (2019) · Management Science · doi:10.1287/mnsc.2019.3390 · Cited by 239 · see citing works
Payments for Environmental Services: Past Performance and Pending Potentials
Wunder, S., Börner, J., Ezzine‐de‐Blas, D., Feder, S. L., & Pagiola, S. (2020) · Annual Review of Resource Economics · doi:10.1146/annurev-resource-100518-094206 · Cited by 250 · see citing works
Motivational Spillovers from Awards: Crowding Out in a Multitasking Environment
Gubler, T., Larkin, I., & Pierce, L. (2016) · Organization Science · doi:10.1287/orsc.2016.1047 · Cited by 238 · see citing works
Organizational Control Systems and Pay-for-Performance in the Public Service
Frey, B. S., Homberg, F., & Osterloh, M. (2013) · Organization Studies · doi:10.1177/0170840613483655 · Cited by 237 · see citing works
Sabotage in Tournaments: Evidence from a Laboratory Experiment
Harbring, C., & Irlenbusch, B. (2011) · Management Science · doi:10.1287/mnsc.1100.1296 · Cited by 239 · see citing works
Huang, H., Lin, T., Lai, M., & Lin, T.-L. (2014) · International Journal of Hospitality Management · doi:10.1016/j.ijhm.2014.04.006 · Cited by 234 · see citing works
Carpio, C., & Bench, N. S. (2015) · World Bank, Washington, DC eBooks · doi:10.1596/978-1-4648-0594-3 · Cited by 233 · see citing works
When punishment fails: Research on sanctions, intentions and non-cooperation
Houser, D. E., Xiao, E., McCabe, K., & Smith, V. L. S. (2007) · Games and Economic Behavior · doi:10.1016/j.geb.2007.05.001 · Cited by 232 · see citing works
Stakes Matter in Ultimatum Games
Andersen, S., Ertaç, S., Uri Gneezy, B., Hoffman, M., & List, J. A. (2011) · American Economic Review · doi:10.1257/aer.101.7.3427 · Cited by 232 · see citing works
- Authors
- Gneezy, U., & Rustichini, A.
- Affiliations
- Boston University (US)
- ORCID
- Rustichini, Aldo
- Venue
- Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 2000-08
- Volume
- 115
- Issue
- 3
- Pages
- 791-810
- ISSN
- 0033-5533 (ISSN-L)
- 1531-4650
- OpenAlex
- W2168112513
- Cited by
- 2,175
- References
- 44
- Citations by year
- 2026: 61 · 2025: 67 · 2024: 70 · 2023: 127 · 2022: 78 · 2021: 126 · 2020: 93 · 2019: 111 · 2018: 93 · 2017: 119 · 2016: 138 · 2015: 140 · 2014: 132 · 2013: 129 · 2012: 109
- FWCI
- 57.67
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Quarterly Journal of Economics (publishedVersion)
- Research portal (Tilburg University) (submittedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- HighWire Press Open Archive (submittedVersion)
- Topics
- Social Sciences › Safety Research › Experimental Behavioral Economics Studies
- Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
- Social Sciences › Business, Management and Accounting › Management Information Systems › Accounting and Organizational Management
- Keywords
- financial incentives, financial compensation, performance, incentive effects, non-monetary incentives, non-monotonic effects
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Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.
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