Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2010-07-29 Number: 10-074/1 Author-Name: Jana Vyrastekova Author-Workplace-Name: Radboud University Nijmegen, the Netherlands Author-Name: Sander Onderstal Author-Workplace-Name: University of Amsterdam, the Netherlands Author-Name: Pierre Koning Author-Workplace-Name: CPB Netherlands Bureau for Economic Policy Analysis, the Netherlands Title: Self-Selection and the Power of Incentive Schemes: An Experimental Study Abstract: This discussion paper led to an article in Applied Economics (2012). Vol. 44(32), pages 4211-4219.

We examine how self-selection of workers into firms depends on the power of the firms' incentive schemes and how it affects the performance of firms that increase the power of the incentive schemes. In a laboratory experiment, we let subjects choose between (low-powered) team incentives and (high-powered) individual incentives. We observe that subjects exhibiting high trust or reciprocity in the trust game are more likely to choose team incentives. When exposed to individual incentives, workers who chose team incentives perform worse if both the unobservable interdependency between workers and their incentive to cooperate under team incentives are high. Classification-JEL: C91, J33, M52 Keywords: Incentive scheme, Self-selection, Laboratory experiment File-Url: https://papers.tinbergen.nl/10074.pdf File-Format: application/pdf File-Size: 214189 bytes Handle: RePEc:tin:wpaper:20100074