Bonus Payments and Reference Point Violations
Axel Ockenfels, Dirk Sliwka, Peter Werner
Management Science · 2015 · Volume 61 · Issue 7
Abstract
We investigate how bonus payments affect the satisfaction and performance of managers in a large multinational company. We find that falling behind a natural reference standard for a fair bonus payment (a “reference point violation”) reduces satisfaction and subsequent performance. The effects are mitigated if information about one’s relative standing toward the reference point is withheld. A model and a laboratory experiment provide complementary insights and additional robustness checks. This paper was accepted by Uri Gneezy, behavioral economics.
Keywords
reference points, bonus payments, job satisfaction, job performance, transparency
Enable JavaScript for citation tools and additional paper interactions.