ICES Brown Bag for October 12

Events, Seminars | October 5, 2017

Join us for the next ICES Brown Bag Lecture of the semester, featuring Aleksandr Alekseev.

Mr. Alekseev, of Georgia State University, will discuss his paper Give Me a Challenge or Give Me a Raise (Abstract). The talk will take place on Thursday, October 12th, from 12:00 to 1:00pm, in room 5075 of the Vernon Smith Hall (formerly Metropolitan Building), Arlington campus.

Coffee and dessert will be provided.

Please visit the Brown Bag Schedule to learn more about the Brown Bag series.

Abstract

I study the effect of task difficulty on workers’ effort and compare it to the effect of monetary rewards in a tightly controlled laboratory experiment. I find that task difficulty has an inverse-U effect on effort, and that this effect is quantitatively large when compared to the effect of conditional rewards. Difficulty acts as an important mediator of monetary rewards: they are most effective at the medium level of difficulty. I show that the inverse-U pattern of effort response to difficulty is not consistent with the Expected Utility model but is consistent with the Rank-Dependent Utility (RDU) model that allows for probability weighting. I structurally estimate the RDU model and find that it fits the data well. These findings suggests that 1) task difficulty is a useful and costless tool to stimulate effort, 2) to elicit the optimal amount of effort, the task has to be reasonably challenging, and 3) the design of optimal incentive schemes for workers should take into account task difficulty.

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