Incentive Complexity, Bounded Rationality and Effort Provision by Johannes Abeler

Join us for another event in the Microeconomics Research Seminar Series, Autumn Term 2022.

Johannes Abeler from the Department of Economics, University of Oxford will present

Abstract 

We test whether complexity of workplace incentive schemes, and worker bounded rationality, can affect effort provision, using a combination of field and laboratory experiments. The paper has four main results.

1. Complexity of workplace incentives affects effort provision. In the specific class of incentive schemes we consider, complexity actually increases effort by shrouding a perverse dynamic incentive to provide low effort.

2. Heterogeneity in worker bounded rationality, captured by cognitive ability, matters for recognizing shrouded attributes and thus effort responses.

3. Our findings suggest that a key mechanism for shrouding is that, in order to respond to dynamic incentives, workers would need to engage in relatively complex contingent thinking, although distractors and the way incentives are explained also matter.

4. Shrouding can be robust, remaining intact despite significant perturbations to the structure and communication of the incentive scheme.

Incentive Complexity, Bounded Rationality and Effort Provision

This seminar will be held in the Economics Common Room on Monday 7 November 2022 at 4pm. This event is open to all levels of study and is also open to the public.

To register your place and gain access to the webinar, please contact the seminar organisers.

This event is part of the Microeconomics Research Seminar Series.