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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Steffen Andersen

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Working Papers

October 2012Carrots that Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes
with Omar Al-Ubaydli, Uri Gneezy, John A. List: w18453
Constructing compensation schemes for effort in multi-dimensional tasks is complex, particularly when some dimensions are not easily observable. When incentive schemes contractually reward workers for easily observed measures, such as quantity produced, the standard model predicts that unrewarded dimensions, such as quality, will be neglected. Yet, there remains mixed empirical evidence in favor of this standard principal-agent model prediction. This paper reconciles the literature by using both theory and empirical evidence. The theory outlines conditions under which principals can use a piece rate scheme to induce higher quantity and quality levels than analogous fixed wage schemes. Making use of a series of complementary laboratory and field experiments we show that this effect occurs b...

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