Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279291 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10541
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can affect effort provision, by shrouding attributes of the incentives. In our setting, complexity leads workers to over-provide effort relative to a fully rational benchmark, and improves efficiency. We identify contract features, and facets of worker cognitive ability, that matter for shrouding. We find that even relatively small degrees of shrouding can cause large shifts in behavior. Our results illustrate important implications of complexity for designing and regulating workplace incentive contracts.
Subjects: 
complexity
bounded rationality
shrouded attribute
Ratchet effect
dynamic incentives
field experiments
JEL: 
D80
D90
J20
J30
Document Type: 
Working Paper
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