While commitment devices such as defaults and direct deposits from wages have been found to be highly effective to increase savings, they are not available to the millions of people worldwide who work in the informal sector or as independent entrepreneurs, since they do not have a formal wage bill. Self-help peer groups are an alternative commitment device that is widespread and highly accessible. We conducted two randomized field experiments among low-income micro-entrepreneurs in Chile to analyze their effectiveness. In the first experiment, we find that self-help peer groups are very potent at increasing savings. In contrast, a more classical measure to increase savings, a substantially increased interest rate, has no effect on the vast majority of participants. A second field experiment is designed to unbundle the key elements of peer groups as a commitment device and finds that surprisingly, the actual meetings and peer pressure do not seem to be crucial for their effectiveness.

Previous research has argued that compensation plans based on the pay-forperformance principle are effective in inducing higher levels of effort and in avoiding diversion of funds by managers. How should managerial compensation be structured if the problem is to induce managers to pursue more innovative business strategies? In a controlled laboratory experiment, we provide evidence that the combination of tolerance for early failure and reward for long-term success is successful in motivating innovation. Subjects under such an incentive scheme explore more and are more likely to discover a novel business strategy than subjects under fixed-wage and standard pay-for-performance incentive schemes. We also find evidence that the threat of termination can undermine incentives for innovation, while golden parachutes can alleviate these innovation-reducing effects.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Vincenzo Scoppa University of Calabria Rosanna Nisticò University of Calabria We evaluate the effectiveness of monetary incentives in enhancing student performance using a randomized experiment involving undergraduate students enrolled at a southern Italian University. Students were assigned to three different groups: a high-reward group, a low-reward group, and a control group. Rewards were given to the 30 best-performing students in each group. Financial rewards increase student performance. High-ability students react strongly whereas the effect is null for low-ability students. Large and small rewards produce very similar effects. These effects also persist in subsequent years, when the financial incentives are no longer in place. No types of crowding-out effects of the monetary incentives are found.

Almost all jobs require a combination of cognitive effort and labor effort. This paper focuses on the effect that competitive incentive schemes have on the chosen combination of these two types of efforts. We use an experimental approach to show that competitive incentives may induce agents to work harder but not necessarily smarter. This effect was stronger for women.

Prior research has suggested that people prefer to remain uncertain about the possible negative social consequences of their actions and that this uncertainty facilitates selfish behavior. Our participants played an economic game where they were uncertain about how selfish actions would affect other players; we offered participants various incentives to “look ” at the potential consequences of their actions, and this reduced selfishness. Contrary to both “crowding out ” and adverse selection, participants who were paid to look were more generous than participants who looked without payment. We also find that these payments can be cost-effective: small payments can lead to social welfare gains that are larger than the total cost of subsidies. Our results suggest an efficient way of changing behavior because it may be cheaper to pay someone to look at information about their social footprint—thus activating their social preferences—than it would be to directly monitor/reward prosocial behavior. 1

Objective: To review existing evidence on the potential of incentives to undermine or “crowd out ” intrinsic motivation, in order to establish whether and when it predicts financial incentives to crowd out motivation for health-related behaviors. Method: We conducted a conceptual analysis to compare definitions and operation-alizations of the effect, and reviewed existing evidence to identify potential moderators of the effect. Results: In the psychological literature, we find strong evidence for an undermining effect of tangible rewards on intrinsic motivation for simple tasks when motivation manifest in behavior is initially high. In the economic literature, evidence for undermining effects exists for a broader variety of behaviors, in settings that involve a conflict of interest between parties. By contrast, for health related behaviors, baseline levels of incentivized behaviors are usually low, and only a subset involve an interpersonal conflict of interest. Correspondingly, we find no evidence for crowding out of incentivized health behaviors. Conclusion: The existing evidence does not warrant a priori predictions that an undermining effect would be found for health-related behaviors. Health-related behaviors and incentives schemes differ greatly in moderating characteristics, which should be the focus of future research.

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Crowdsourcing has become an increasingly popular means of flexibly deploying large amounts of human computational power. The present chapter investigates the role of microtask labor marketplaces in managing human and hybrid human machine computing. Labor marketplaces offer many advantages that in combination allow human intelligence to be allocated across projects rapidly and efficiently and information to be transmitted effectively between market participants. Human computation comes with a set of challenges that are distinct from machine computation, including increased unsystematic error (e.g. mistakes) and systematic error (e.g. cognitive biases), both of which can be exacerbated when motivation is low, incentives are misaligned, and task requirements are poorly communicated. We provide specific guidance to how to ameliorate these issues through task design, workforce selection, data cleaning and aggregation. Risks and Rewards of Crowdsourcing Marketplaces The present chapter focuses on the risks and rewards of using online marketplaces to enable crowdsourced human computation. We discuss the strengths and limitations of these marketplaces, with a particular emphasis on the quality of crowdsourced data collected from Amazon Mechanical Turk. Data quality is by far the most important consideration when

Abstract: This paper estimates social effects of incentivizing people in teams. In two field experiments featuring exogenous team formation and opportunities for repeated social interactions, we find large team effects that operate through social channels. The team compensation system induced agents to choose effort as if they valued a marginal dollar of compensation for their teammate from two-thirds as much (in one study) to twice as much as they valued a dollar of their own compensation (in the other study). We conclude that social effects of monetary team incentives exist and can induce effort at lower cost than through direct

The use of short-term bonuses to motivate employees has become an organizational regularity, but a thorough understanding of the relationship between these incentives and actual perfor-mance is lacking. We aim to advance this understanding by examining how three types of bonuses (cash, family meal voucher, and verbal reward) affect employees ’ productivity in a field experiment conducted in a high-tech manufacturing factory. While all types of bonuses increased performance by over 5%, nonmonetary short-term bonuses had a slight advantage over monetary bonuses. In addition, the removal of the bonuses led to decreased productivity for monetary bonuses but not for the verbal reward. However, this negative effect of monetary short-term bonuses diminishes when a cash bonus is chosen by employees rather than granted by default. Theoretical implications about the effect of short-term bonuses on intrinsic motiva-tion and reciprocity, as well as practical applications of short-term bonus plans that stem from our findings, are discussed.