An experimental examination of compensation schemes and level of effort in differentiated tasks

• In our experiment, the participants engaged in two types of tasks with five compensation schemes.
• For the task without intrinsic motivation, effort levels were lower for high fixed pay than low fixed pay and no payment.
• For the task without intrinsic motivation, efforts were higher for low incentive pay than high incentive pay and no payment.
• The relationship between task effort with intrinsic motivation and the compensation scheme follows standard economic theory.

We examine the influence of different compensation schemes on the exertion of effort in completing differentiated tasks. The first task is assumed to be boring and has no intrinsic motivation, while the second is assumed to be interesting and has intrinsic motivation. The results are as follows: (1) for the first task, effort levels were lower for high fixed pay than low fixed pay and no payment and were higher for low incentive pay than high incentive pay and no payment. (2) Standard economic theory holds for the second task, which predicts that the higher the incentive, the more effort an individual will exert and the greater the performance, on an average.