Title
Examining the Tradeoff between Fixed Pay and Performance-related Pay: A Choice Experiment Approach
Abstract
Previous investigations on performance-related pay have mainly analyzed its relationships with earnings, productivity, and job satisfaction. Less attention has been devoted to the investigations of individuals’ preferences for the performance-related payment system per se and consequently the tradeoff between fixed pay and performance-related pay. In this paper, we first use a choice experiment approach to investigate the tradeoff between fixed pay and performance-related pay, and then link the tradeoff for each individual with their risk preferences. Our main results indicate that individuals’ preferences for the payment system per se and the magnitude of tradeoffs between fixed pay and performance pay are different according to their risk preferences.
Keywords
Fixed pay, Performance-related pay, Choice experiment, Risk preference
JEL Classification
C35, J33
Inquiries
Research Institute for Economics and Business Administration,
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059
Kazuhito OGAWA
Faculty of Sociology, Kansai University
Hiromasa TAKAHASHI
Faculty of International Studies, Hiroshima City University