Incentive Complexity, Bounded Rationality, and Effort Provision

Last registered on June 06, 2023

View Trial History

Pre-Trial

Trial Information

General Information

Title

Incentive Complexity, Bounded Rationality, and Effort Provision

RCT ID

AEARCTR-0011427

Initial registration date

June 01, 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

June 06, 2023, 4:14 PM EDT

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

Locations

Country

United Kingdom of Great Britain and Northern Ireland

Region

Primary Investigator

Name

David Huffman

Affiliation

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Johannes Abeler

PI Affiliation

U. of Oxford

Contact Investigator

PI Name

Collin Raymond

PI Affiliation

Cornell University

Contact Investigator

Additional Trial Information

Status

Completed

Start date

2014-06-01

End date

2017-06-30

Keywords

Behavior, Labor

Additional Keywords

JEL code(s)

D8, D9, J2, J3

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can interact to affect effort provision, by shrouding particular attributes of the incentives. In our setting, complexity leads workers to over-provide effort relative to a fully rational benchmark, and improves efficiency. We identify contract features, and facets of worker cognitive ability, that matter for shrouding. We find that even relatively small degrees of shrouding can cause large shifts in behavior. Our results illustrate important implications of complexity for designing and regulating workplace incentive contracts.

External Link(s)

Registration Citation

Citation

Abeler, Johannes, David Huffman and Collin Raymond. 2023. "Incentive Complexity, Bounded Rationality, and Effort Provision." AEA RCT Registry. June 06. https://doi.org/10.1257/rct.11427-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

There was a staggered roll out of a static incentive system paying piece rates for manual work.

In a field experiment denoted INDIVIDUAL trial, the intervention gave treatment workers a dynamic financial incentive to work slower, without any motives related to social or group pressure.

In a field experiment denoted GROUP trial, the intervention gave treatment workers a dynamic financial incentive to work slower, but also potential non-financial motives related to social or group pressure.

Intervention Start Date

2014-12-01

Intervention End Date

2017-06-30

Primary Outcomes

Primary Outcomes (end points)

Worker effort (output) as measured by units per hour.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

The introduction of static incentives happened on a staggered basis across areas of the firm's warehouse. The timing of introduction was not randomized. We compare before and after, and compare to a control warehouse that did not have a change in incentive schemes, to estimate the impact on worker effort of introducing static incentives.

The INDIVIDUAL trial randomly assigned new hires to treatment and control on a weekly basis. For each cohort of new hires the trial lasted 12 weeks. Weeks 1 to 3 were a baseline period in which incentives were the same for treatment and control. In weeks 4 to 6, treatment and control had the same contemporaneous incentives, but treatment had dynamic incentives to work slower. This is because, in weeks 7 to 9, the incentives of treatment workers were a function of their speeds in weeks 4 to 6, whereas incentives for control workers were independent of previous speed. Specifically, working faster in weeks 4 to 6 would make it harder to earn money in weeks 7 to 9 for treatment workers. In weeks 7 to 9, control workers had similar dynamic incentives, because in weeks 10 to 12 their incentives were a function of speed in weeks 7 to 9.

The GROUP trial randomly assigned a portion of all workers in the warehouse to treatment and control. Each month, treatment and control workers had the same contemporaneous incentives, but treatment workers had dynamic incentives. The average speed of all treatment workers doing a given task in a given month determined the incentives of both treatment and control workers in the next month for that task. Specifically, if treatment workers were faster, it would make it harder for everyone to earn incentive payments next month. Control workers did not influence anyone's incentives. The trial lasted 10 months, after which incentives were determined on the average speeds of all workers.

Experimental Design Details

Randomization Method

Randomization was done by the researchers using a computer.

Randomization Unit

The individual worker was the unit.

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

Sample size: planned number of observations

Introduction of static incentives affected the entire workforce. Over the course of our analysis period we expected to have roughly 4,000 workers and ended up with 4,580 (including the control warehouse). We planned to have roughly 650 workers for treatment and control, respectively, in INDIVIDUAL (we ended up with 1,294 workers), and to assign 40 percent and 60 percent of the workforce to treatment and control, respectively, in GROUP (this yielded 1,447 workers).

Sample size (or number of clusters) by treatment arms

We planned to have roughly 650 workers for treatment and control, respectively, in INDIVIDUAL (we ended up with 631 and 663, respectively), and to assign 40 percent and 60 percent of the workforce to treatment and control, respectively, in GROUP (this yielded 573 and 874, respectively).

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB