Incentivizing Complex Problem Solving in Teams – Evidence from a Field Experiment

Florian Englmaier (LMU Munich)
Stefan Grimm (LMU Munich)
David Schindler (Tilburg)
Simeon Schudy (LMU Munich)

Abstract: Despite the prevalence of non-routine analytical team tasks in modern economies, little is known about how incentives influence performance in these tasks. In a field experiment with more than 3000 participants, we document a positive effect of bonus incentives on the probability of completion of such a task. Bonus incentives increase performance due to the reward rather than the reference point (performance threshold) they provide. The framing of bonuses (as gains or losses) plays a minor role. Incentives improve performance also in an additional sample of presumably less motivated workers. However, incentives reduce these workers' willingness to "explore" original solutions.