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Incentivizing Quantity and Quality of Output: An Experimental Investigation of the Quantity-Quality Trade-off

Author

Listed:
  • Jared Rubin

    (Argyros School of Business and Economics, Chapman University)

  • Anya Samek

    (Center for Economic and Social Research, University of Southern California)

  • Roman M. Sheremeta

    (Weatherhead School of Management, Case Western Reserve University)

Abstract
Firms face an optimization problem that requires a maximal quantity output given a quality constraint. How firms should incentivize quantity and quality to meet these dual goals remains an open question, potentially due to limitations of field data. We provide a theoretical model and conduct an experiment in which participants are paid for both quantity and quality of a real effort task. Consistent with the theoretical predictions, higher quality incentives encourage participants to shift their attention from quantity to quality, and higher quality incentives reduce inefficient decision-making. We also observe behavioral components in responsiveness to the quality incentive.

Suggested Citation

  • Jared Rubin & Anya Samek & Roman M. Sheremeta, 2016. "Incentivizing Quantity and Quality of Output: An Experimental Investigation of the Quantity-Quality Trade-off," Working Papers 16-01, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:16-01
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    References listed on IDEAS

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    More about this item

    Keywords

    quantity; quality; experiment; incentives; real effort; loss aversion;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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