Disentangling Incentive Effects from Sorting Effects: An Experimental Real-Effort Investigation

This study separates and compares sorting and incentive effects and analyses their contingencies in a real-effort laboratory experiment. Depending on the treatment, subjects have a choice between a piece rate, a budget-based and a fixed pay, or have no choice but are assigned to a compensation scheme. The results suggest that sorting effects have a greater impact on productivity than incentive effects. Variance in productivity within self-selected groups is smaller than within assigned groups. As to the contingencies of incentive effects, we find that anxiety and internal control conviction have a negative influence on productivity, whereas the perceived level of challenge has a positive influence. Self-selection into contracts with higher magnitude of incentives is found to be positively influenced by need for achievement and negatively influenced by internal control conviction and risk aversion. The analyses also show that skill and monetary compensation account for a large proportion of the incentive and sorting effects.