Spillovers From Incentive Schemes on Distributional Preferences and Expectations


ABSTRACT
 
Although economic theory assumes that preferences are stable, several studies have shown that preferences are shaped by experiences. In the workplace, incentive schemes may spillover on distributional preferences and beliefs, which underlie an employee’s willingness to cooperate or help each other. In an online experiment we disentangle the effects on preferences and beliefs. In six different treatments, we vary the incentive scheme (competitive vs. team incentives) for a real effort task and the feedback participants receive at the end of the real effort task. Subsequently, we measure distributional preferences and beliefs. If no feedback is provided, participants show stronger distributional preferences (i.e., they put a higher weight on the other’s payoff) if they are incentivized by team incentives in comparison to piece-rate remuneration. Surprisingly, this positive effect prevails under competitive incentives without feedback. With feedback about relative performance, the spillover effects differ between the incentive schemes. Under competitive incentives, participants show weaker distributional preferences (negative spillovers), but only for low performers. Under team incentives, we find negative spillovers on preferences for high performers and positive spillovers for low performers. We find no evidence for spillovers on beliefs.

Speaker Homepage: https://berlin.bard.edu/people/profiles/marcus-giamattei

Zoom link: https://univr.zoom.us/j/84682272373