The "sales agent" problem : effort choice under performance pay as behavior toward risk / Nick Zubanov (Goethe University Frankfurt and IZA), C. Bram Cadsby (University of Guelph), Fei Song (Ryerson University) ; IZA, Institute of Labor Economics
VerfasserZubanov, Nikolay In der Gemeinsamen Normdatei der DNB nachschlagen ; Cadsby, Charles Bram In der Gemeinsamen Normdatei der DNB nachschlagen ; Song, Fei In der Gemeinsamen Normdatei der DNB nachschlagen
KörperschaftForschungsinstitut zur Zukunft der Arbeit In der Gemeinsamen Normdatei der DNB nachschlagen
ErschienenBonn, Germany : IZA Institute of Labor Economics, February 2017
Elektronische Ressource
Umfang1 Online-Ressource (31 Seiten) : Diagramme
SerieDiscussion paper ; no. 10542
URNurn:nbn:de:hbz:5:2-112840 Persistent Identifier (URN)
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The "sales agent" problem [0.92 mb]
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We present a model and an experiment that show, in a very general setting, that effort choice under a given linear pay-for-performance contract depends on how the financial risk associated with the scheme interacts with effort. We find that, under a given contract, if risk increases with effort, risk-averse (loving) individuals exert less (more) effort. In contrast, when risk is independent of effort, risk preferences do not affect effort choice. Our findings complement the larger literature on selection into incentive pay by showing that lower effort exerted by the risk-averse under a given incentive contract is another type of behaviour toward risk.