Utility of merit increases

Abstract

Utilized a magnitude estimation technique to determine the relationship between merit increases and satisfaction for 157 professional employees of an electronics organization. The linear, logarithmic, and power functions were fitted to the data in combination with 4 frames of reference. The power function and the percentage of perceived equitable merit increase frame of reference gave the best fit to the data. The Bernoullian concept of diminishing utility for each added dollar was not supported. Analyses found that each dollar of merit increase had increased utility. For approximately 10% of the sample, satisfaction was not a monotonic increasing function of dollars. This is contrary to accepted economic theory but is consistent with equity theory. (18 ref.) (PsycInfo Database Record (c) 2025 APA, all rights reserved)