Journal Article

Payment scheme changes and effort adjustment: The role of 2D:4D digit ratio

Journal of Behavioral and Experimental Economics, 72: 86-94

People are usually more productive when they are paid according to their performance. Yet, it is reported that women prefer fixed rate payment over performance based payment schemes. This study experimentally investigates i) whether absolute incentives are effective without the knowledge of an alternative incentive scheme, ii) the possible role of the sexually dimorphic 2D:4D digit ratio, which is claimed to be a negative bio-marker of prenatal testosterone exposure, in effort provision. Results show that a switch from a piece rate to a fixed rate payment scheme reduces effort provision in a real effort task while switching in the other direction increases effort provision. When the piece rate is replaced with fixed payment, men and participants with lower 2D:4D show a greater decrease in effort than the rest. We do not observe any impact of gender or 2D:4D on effort adjustment behavior when fixed payment is replaced with a piece rate. Our results also contribute to the discussion on the incentive compatibility of the Slider Task.

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