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Yuri Khoroshilov and Anna Dodonova
''A carrot, a stick, or a relative piece-rate: an experimental study''
( 2021, Vol. 41 No.3 )
Using an experimental setting, this paper investigates people's preferences over, and performance of, three compensation contracts: relative bonus-based, relative penalty-based, and relative piece-rate (RPR) contracts. It finds that, given the same expected payoff, most subjects prefer a bonus-based contract, followed by RPR, with the penalty-based being the least preferred choice. While evaluating efficiency, we find that bonus-based compensation results in the worst performance, while the performance levels under penalty-based and RPR contracts are virtually identical.
Keywords: Compensation contract; Incentive contract; Experimental study; Relative Compensation
JEL: C9 - Design of Experiments: General
J3 - Wages, Compensation, and Labor Costs: General
Manuscript Received : Sep 17 2021 Manuscript Accepted : Sep 17 2021

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