Apr. 5, David Cooper, Ph.D. – Ambiguity in Performance Pay: An Online Experiment

New faculty David CooperAbstract: Many incentive plans do not include an explicit mapping between workers’ effort and compensation. Potential employees therefore face both risk and uncertainty when choosing whether to accept an employment contract. Using an online labor market, Amazon Mechanical Turk, we study the willingness of individuals to accept a contract to perform a real-effort task as well as their performance at this task. We manipulate the information potential workers have about how a performance bonus is assigned and their ability at the task. We find that ambiguity about the relationship between a worker’s performance and their bonus affects both the willingness of individuals to accept a contract and their willingness to complete the task. Ambiguity has no effect on performance subject to completing the task. Information about ability reduces willingness to accept a contract and also affects willingness to complete the task. Task performance is not affected by information about ability.

Bio: David J. Cooper is the Brim Eminent Scholar in Economics at Florida State University. His research focuses on experimental economics with applications to game theory, organizational economics, and entrepreneurship. He has written papers on learning in strategic settings, decision making by teams in strategic settings, overcoming coordination failure within organizations, and the role of communication in fostering collusion. His work has appeared in the American Economic Review, the Journal of Economic Theory, Games and Economic Behavior, the Rand Journal of Economics, and the Journal of the European Economic Association. Dr. Cooper is joint Editor-in-Chief for Experimental Economics.