The effects of financial incentives in experiments: A review and capital-labor-production framework

We review 74 experiments with no, low, or high performance-based financial incentives. The modal result has no effect on mean performance (though vari ance is usually reduced by higher payment). Higher incentive does improve p erformance often, typically judgment tasks that are responsive to better ef fort. Incentives also reduce "presentation" effects (e.g., generosity and r isk-seeking). Incentive effects are comparable to effects of other variable s, particularly "cognitive capital" and task "production" demands, and inte ract with those variables, so a narrow-minded focus on incentives alone is misguided. We also note that no replicated study has made rationality viola tions disappear purely by raising incentives.