Template-Type: ReDIF-Paper 1.0
Author-Name: Zubanov, N.V.
Author-Name-Last: Zubanov
Author-Name-First: Nick
Title: Risk Aversion and Effort in an Incentive Pay Scheme with Multiplicative Noise: Theory and Experimental Evidence
Abstract: The application of the classical "linear" model of incentive pay to the case when the noise is multiplicative to effort generates two predictions for a given strength of incentives: 1) more risk-averse workers will put in less effort, and 2) setting a performance target will weaken the negative risk aversion--effort link. The data from a real-effort laboratory experiment involving 85 student participants support both these predictions. Implications of the model and empirical findings to the literature on, and practice of, personnel management are discussed.
Creation-Date: 2012-03-20
File-URL: https://repub.eur.nl/pub/32031/ERS-2012-005-STR.pdf
File-Format: application/pdf
Series: RePEc:ems:eureri
Number: ERS-2012-005-STR
Classification-JEL: C91, J33, M52
Keywords: incentive pay, performance targets, risk aversion
Handle: RePEc:ems:eureri:32031