An Experimental Examination of Compensation Schemes and Level of Effort in Differentiated Tasks


We examine the influence of different compensation schemes on exertion of effort for differentiated tasks. The first type of task is assumed to be boring and has no intrinsic motivation, while the second is assumed to be interesting, and has a higher intrinsic motivation. The results are as follows: (1) in the first task, standard economic theory, which claims higher pay should result in higher effort, does not hold. (2) Standard economic theory holds for the second task, which predicts that the higher the incentive, the more effort one exerts, and achieves a higher performance on average.


Real effort experiment, Intrinsic motivation, Loss aversion, Fixed pay, Incentive pay

JEL Classification

M52, J33


Faculty of International Studies, Hiroshima City University, Japan

Junyi SHEN
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, Japan