Perceptions and Performance Under Incentive Contracts

Intervention:
(i) Conduct baseline surveys with managers and agents to elicit their most preferred incentive scheme across a set of bonus schemes and rank all incentive schemes in terms of revenue maximization.
(ii) Randomize the implementation of different contract schemes, derived based on managers’ and agents’ preferences: status quo vs. manager-favorite vs. agent/worker-favorite.

2024-12-01

2025-03-31

##Administrative firm data to estimate treatment effects:
*worker output: revenues
*types of transactions (withdrawals or deposits or others), number of transactions and customers, and average transaction amounts
*worker inputs: the number of working days per week, opening hours per working day (inferred from daily transaction records)


##Endline surveys:
*hours and days of operation, liquidity, worker hiring, advertising or marketing campaigns
*service quality: agent presence, failed transactions, customer service, misconduct, and overcharging
*non-mobile money lines of business, coordination between agents
*qualitative discussions about:
(i) possible mechanisms,
(ii) what managers/workers will consider optimal contract in words (this may/may not include the 5 options we presented or not),
(iii) why they chose/rank the contracts the way they did.

Research questions:
(1) Which incentive schemes do managers and workers perceive to work best and why?
(2) What is the extent of disagreement between managers and workers about their preferred contracts?
(3) What incentives work best in practice?
(4) How well do managers' and workers' predictions align with actual outcomes? What leads individuals to be able to better predict what contracts will work well?

Our study is composed of two main parts. The baseline survey will provide answers to the first two research questions: managers' and agents' preferred contracts and the extent to which they agree with each other. The RCT will provide answers to the last two research questions: the actual impact of various contracts and whether managers and agents are sophisticated about these impacts.

To implement both the survey and RCT feasibly, we will focus on a small set of bonus schemes. These schemes represent key structures emphasized in the literature and are widely used in practice. Additionally, we have confirmed with the service provider that these schemes are logistically implementable. Our selected schemes include:
• Individual Performance-Based Schemes:
1. Status Quo Linear Contract: Workers receive bonuses for every unit of output.
2. Threshold Contract: Workers receive a flat payment upon reaching a predetermined threshold.
3. Pseudo-Franchising Scheme: Akin to two-Part Tariff, workers receive a boost in the per-unit commission in exchange for an upfront fee.
4. Multi-Tasking Contract: Both core and allied services are included in the bonus calculation. [core: cash in and outs; allied: airtime purchase, customer registration]
• Relative Comparison Schemes:
5. Tournament Scheme: Workers compete in tournaments where top performers in each locality receive an additional bonus.
• Control Scheme:
6. No Bonus Contract: This contract, strictly dominated by any other contract, is included to check whether respondents pay attention and understand the options presented.


#### Perceptions of incentive contracts [RQ1-2]
To answer the first two research questions, we will first conduct baseline surveys with managers and agents to elicit their most preferred incentive scheme and rank all incentive schemes in terms of revenue maximization.


#### Performance under incentive contracts [RQ3]
For the third research question of estimating the causal effects of various contract schemes, we will conduct a large-scale nationwide randomized controlled trial (RCT) using the same study sample. The RCT will involve randomizing the implementation of different contract schemes, derived based on managers’ and agents’ preferences.

The randomization will occur at the local TSC level, meaning every manager and agent within a TSC receives the same treatment. This level of randomization is chosen because TSCs manage AADs and ensure the appropriate deployment of incentives in the field. TSC managers also influence higher-level decisions, bridging the information gap between lower-level and senior managers.
Specifically, one-third of the TSCs (n=~22) and communities (n=133) will be assigned to the control group, maintaining the status quo of a linear contract. Another third (n=~22 TSCs and n=133 communities) will be assigned to the "manager-favorite" contract, implementing the scheme preferred by a majority of managers. The final third (n=~22 TSCs and n=133 communities) will be assigned to the "agent-favorite" contract, implementing the scheme preferred by a majority of agents.

For fair comparisons, the contracts will be designed to ensure budget neutrality, such that the average total bonus payment is constant across communities.


#### Connecting perceptions and performance under incentive contracts [RQ4]
By linking the administrative firm data to survey responses, we can answer the fourth research question: whether managers and workers accurately assess the effects of different contract structures.


###Heterogeneity and nature of selection:
(1) Test whether managers can predict which contracts will work best for agents within versus outside their TSC.
(2) Assess heterogeneity based on (i) managers’ and agents’ reported preferences at baseline and (ii) features of the environment agents operate in to characterize selection.

Randomization done in office by a computer.

At local TSC-manager level.

Yes

~65 TSCs
400 communities

15 agents/community x 4000 communities = 6,000 agents or workers 65 TSC managers and all other managers = ~650 managers

15 agents/community x 4000 communities = 6,000 agents or workers
65 TSC managers and all other managers = ~650 managers