2000/07/01 by Geoffrey B. Sprinkle · 1 voice
Decision Sciences · Social Sciences · #Auction Theory and Applications #Decision-Making and Behavioral Economics #Experimental Behavioral Economics Studies
paper · doi:10.2308/accr.2000.75.3.299
openalex publication_date 2000/07/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/15
This paper reports the results of an experiment that examines how incentive-based compensation contracts compare to flat-wage compensation contracts in motivating individual learning and performance. I use a multiperiod cognitive task where the accounting system generates information (feedback) that has both a contracting role and a belief-revision role. The results suggest that incentives enhance performance and the rate of improvement in performance by increasing both: (1) the amount of time participants devoted to the task, and (2) participants' analysis and use of information. Further, I find evidence that incentives improve performance only after considerable feedback and experience, which may help explain why many prior one-shot decision-making experiments show no incentive effects. Collectively, the results suggest that incentives induce individuals to work longer and smarter, thereby increasing the likelihood that they will develop and use the innovative strategies frequently required to perform well in complex judgment tasks and learning situations.