Effort Provision in a Game of Luck.

Mads Nordmo Arnestad,Bjørnar Laurila,Ola Kvaløy,Kristoffer W Eriksen

doi:10.3389/fpsyg.2021.637339

Mads Nordmo Arnestad, Bjørnar Laurila + Show 2 more

Open Access

https://doi.org/10.3389/fpsyg.2021.637339

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Abstract

In some jobs, the correlation between effort and output is almost zero. For instance, money managers are primarily paid for luck. Using a controlled lab experiment, we examined under which conditions workers are willing to put in effort even if the output (and thus their employer’s earnings) is determined by pure luck. We varied whether the employer could observe the workers’ effort, as well as whether the employer knows that earnings were determined by luck. We find that, workers believed that the employer will reward their effort even if their effort does not affect earnings. Consequently, workers work harder if the employer could observe their (unproductive) effort. Moreover, even when the employer only saw earnings and not effort, workers labored harder if the employer did not know that earnings were determined by luck.

Highlights

In most types of work, increased effort will lead to improved results
What if the workers know their effort does not help performance? Will they still work hard? We investigated this question in a laboratory experiment by assessing under which conditions workers are willing to manifest effort, even if output is determined by pure luck
Moral psychology relies upon three normative ethical theories as a point of departure for moral judgment: consequentialist ethics, whereby the moral value of an action is evaluated on the basis of its material outcomes; deontological ethics, whereby the moral value of an action is judged on the basis of rules, duties, and obligations; and virtue ethics, in which the individual and not the action is the unit of moral evaluation (Uhlmann et al, 2015)

Summary

Introduction

In most types of work, increased effort will lead to improved results. in some jobs, the relationship between effort and outcome is almost zero. Money managers’ effortful behavior may even be negatively related to their performance. Paying close attention to the market may result in erroneous reactions to non-predictive cues (Yates et al, 1991), and result in more frequent and more myopic transactions. This effect is prolific among both students and professional investors (Gneezy and Potters, 1997; Thaler et al, 1997; Gneezy et al, 2003; Haigh and List, 2005) and has been demonstrated in both lab and field experiments (Larson et al, 2016)

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