2012-03-20
Risk Aversion and Effort in an Incentive Pay Scheme with Multiplicative Noise: Theory and Experimental Evidence
Publication
Publication
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.
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| , , | |
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| Erasmus Research Institute of Management | |
| hdl.handle.net/1765/32031 | |
| ERIM Report Series Research in Management | |
| Organisation | Erasmus Research Institute of Management |
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Zubanov, N. (2012). Risk Aversion and Effort in an Incentive Pay Scheme with Multiplicative Noise: Theory and Experimental Evidence (No. ERS-2012-005-STR). ERIM Report Series Research in Management. Retrieved from http://hdl.handle.net/1765/32031 |
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