Working Paper: NBER ID: w28487
Authors: Peter J. Kuhn; Lizi Yu
Abstract: We study the performance of small retail sales teams facing an incentive scheme that includes both a lump sum bonus and multiple accelerators (kinks where the commission rate jumps upward). Consistent with standard labor supply models, we find that the presence of an attainable bonus or kink on a work-day raises mean sales, and that sales are highly bunched at the bonus; inconsistent with those models we find that teams bunch at the kinks instead of avoiding them. Combining simple theoretical models, institutional evidence, and heterogeneity analyses, we argue that that this unexpected bunching results from a previously unrecognized motivational benefit of piecewise linear reward schemes in team environments: Teams use the convenient, salient, kink-points as shared goals, which yield symbolic utility to their members when the points are attained.
Keywords: incentive schemes; sales performance; accelerators; team dynamics; symbolic rewards
JEL Codes: J33; M52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| presence of an attainable bonus or kink on a workday (J33) | mean sales (C29) |
| kinks (L82) | sales performance (L25) |
| kinks as shared goals (L21) | symbolic utility (D46) |
| team production dynamics (L23) | attainment of kinks (L15) |