Journal article
Incentive complexity, bounded rationality and effort provision
- Abstract:
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Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can affect effort provision. This is because some attributes of the incentives become opaque, i.e., workers do not take them into account. In our setting, workers over-provide effort relative to a fully rational benchmark, improving effciency. We identify contract features, and facets of worker cognitive ability, that matter for opacity. We find that even relatively small degrees of opacity can cause large shifts in behavior. Our results illustrate important implications of complexity and bounded rationality for designing and regulating workplace incentive contracts.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
Actions
Access Document
- Files:
-
-
(Preview, Accepted manuscript, pdf, 7.5MB, Terms of use)
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- Publisher copy:
- 10.1257/aer.20230751
Authors
- Funder identifier:
- https://ror.org/03n0ht308
- Grant:
- ES/R011710/1
- Publisher:
- American Economic Association
- Journal:
- American Economic Review More from this journal
- Volume:
- 115
- Issue:
- 12
- Pages:
- 4404-4437
- Publication date:
- 2025-12-01
- Acceptance date:
- 2025-07-31
- DOI:
- EISSN:
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1944-7981
- ISSN:
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0002-8282
- Language:
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English
- Keywords:
- Pubs id:
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2288174
- Local pid:
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pubs:2288174
- Deposit date:
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2025-09-15
- ARK identifier:
Terms of use
- Copyright holder:
- American Economic Association
- Copyright date:
- 2025
- Rights statement:
- Copyright 2025 American Economic Association. All rights reserved.
- Notes:
- The author accepted manuscript (AAM) of this paper has been made available under the University of Oxford's Open Access Publications Policy, and a CC BY public copyright licence has been applied.
- Licence:
- CC Attribution (CC BY)
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