Bonus Payments and Reference Point Violations

Axel Ockenfels; Dirk Sliwka; Peter Werner

doi:10.1287/mnsc.2014.1949

journal article Jul 01, 2015

Bonus Payments and Reference Point Violations

Management Science Vol. 61 No. 7 pp. 1496-1513 · Institute for Operations Research and the Management Sciences (INFORMS)

View at Publisher Save 10.1287/mnsc.2014.1949

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.

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Details

Published: Jul 01, 2015
Vol/Issue: 61(7)
Pages: 1496-1513

Authors

A

Axel Ockenfels

University of Cologne, D-50923 Köln, Germany

D

Dirk Sliwka

University of Cologne, D-50923 Köln, Germany; CESifo, 81679 Munich, Germany; and IZA, 53113 Bonn, Germany

P

Peter Werner

University of Cologne, D-50923 Köln, Germany

Cite This Article

Axel Ockenfels, Dirk Sliwka, Peter Werner (2015). Bonus Payments and Reference Point Violations. Management Science, 61(7), 1496-1513. https://doi.org/10.1287/mnsc.2014.1949

Bonus Payments and Reference Point Violations

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