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Let Them Race: the role of beliefs and fairness views on incentivizing others

Last registered on March 13, 2023

Pre-Trial

Trial Information

General Information

Title
Let Them Race: the role of beliefs and fairness views on incentivizing others
RCT ID
AEARCTR-0011063
Initial registration date
March 08, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
March 13, 2023, 3:07 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Primary Investigator

Affiliation
Norwegian School of Economics

Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2023-03-13
End date
2023-06-30
Secondary IDs
Prior work
This trial is based on or builds upon one or more prior RCTs.
Abstract
Many firms offer extra bonus to motivate their workers. Some bonus schemes reward the workers by their absolute performance or share of contribution, while others reward the workers outperforming their peers. The structure of bonus schemes affects the incentives the workers face and thus their performance, however, it will also determine the distribution of their incomes, which may or may not be perceived as fair. It is intuitive to think that a bonus scheme creating a larger income gap between the high- and low-performers may bring greater overall output, but at the same time unfair to the low-performers if the output gap is sufficiently small. A rank-order tournament, for example, has been shown to outperform other types of bonus schemes in eliciting the workers’ performance (Lazear & Rosen, 1981). On the other hand, it may be seen as unfair since its win-or-lose structure generates unequal incomes unproportional to the workers’ input (Cappelen, Sorensen & Tungodden, 2007; Konow, 2000). Managers sometimes need to make decisions in which they have to trade off efficiency and fairness. Their decisions could differ since they might hold different beliefs about the incentive effect and different fairness views. Moreover, the relative weight they put on efficiency and fairness could also depend on how they themselves are paid.

In this study, I use a controlled experiment to first investigate people’s beliefs about the effect of bonus incentives on performance and their fairness perceptions towards such incentive schemes, then examine how they make decisions on which incentive scheme to choose for others. I recruited workers from Prolific to work on a real-effort online task under two different bonus schemes to collect baseline data. Then, for the main experiment, I provided the managers (participants assigned to the role of managers) with the results from the workers paid by a flat bonus scheme, then asked them to guess the average output of the workers paid by another bonus scheme. Afterwards, the managers were required to choose a bonus scheme for two other workers that would be recruited in the future. The results show that the managers hold heterogeneous beliefs about incentive effects and heterogeneous fairness views, fairness is very important to the their decisions, but the expected amount of commissions on the workers’ output reduces the weight they attach to fairness.
External Link(s)

Registration Citation

Citation
Wang, Weijia. 2023. "Let Them Race: the role of beliefs and fairness views on incentivizing others." AEA RCT Registry. March 13. https://doi.org/10.1257/rct.11063-1.0
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2023-03-13
Intervention End Date
2023-06-30

Primary Outcomes

Primary Outcomes (end points)
Beliefs about productivity difference under different bonus schemes
Fairness comparisons of different bonus schemes
Choice of bonus scheme for others
Decision on whether to revise initial choice (after receiving more information)
Level of agreement/disagreement with statements on some preferences and policy-related views
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The experiment consists of two stages.
In stage 1, the managers are informed that some workers were recruited in the past to work on a real-effort task and that I used three different bonus schemes to motivate these workers. The managers are asked to guess how the different bonus schemes affected the workers’ performance. I provide the managers with the average output of the workers paid by a tournament bonus scheme together with a histogram showing their output distribution. The managers are asked to guess the average output of the workers paid by an equal bonus scheme. I incentivize the managers for accuracy. Then, the managers are asked to make comparisons on the fairness of the two bonus schemes.
In stage 2, the managers are required to make a choice for two workers who will be recruited in the future to work on the same task. The managers choose whether to pay them by the tournament bonus scheme or the equal bonus scheme. Half of the managers are randomly determined to earn a commission proportional to their matched workers’ output. The other half do not earn commissions. The managers are aware that their decisions will be implemented with a one-out-of-ten chance. After making the decision, I ask the managers to write a few sentences on the reasons behind their choices. Then, I provide the managers with full information, the average scores of workers paid by the tournament bonus scheme and equal bonus scheme. With this information, the managers choose whether to keep their initial choice of bonus scheme or choose the other bonus scheme. Again, they write a few sentences to explain their decision.
Finally, the managers answer a short questionnaire on their background information and some preferences.
Experimental Design Details
Randomization Method
Randomization down by a computer
Randomization Unit
individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
n/a
Sample size: planned number of observations
1,000 individuals
Sample size (or number of clusters) by treatment arms
500 in proportional tournament treatment, in which 250 earn commissions, 250 do not earn commissions.
500 in winner-takes-all tournament treatment, in which 250 earn commissions, 250 do not earn commissions.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
NHH Institutional Review Board
IRB Approval Date
2023-01-20
IRB Approval Number
NHH-IRB 42/22
Analysis Plan

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Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials