Abstract

• Scholars have long emphasized the importance of setting specific goals and providing clearexpectations in compensation contracts to boost work performance, but a casual observation of actualcompensation practices suggests otherwise. Using both lab and field experiments, we show thatrandomization of bonus targets and piece rates can lead to higher performance than the best-availabledeterministic scheme. Furthermore, this effect can be sustained over time. We show that part of thiseffect is explained by regret motives, which lead workers to exert extra effort to avoid missing out onpotential pay.
• Keywords: Randomized incentives, bonuses and piece rates, regret, experiments
• Co-authour : Brice Corgnet

Practical information