Workplace Productivity and Bonus Preferences: Why Do Men With Low Productivity Prefer Individual Pay?

Abstract

This paper examines the relationship between workers' productivity and preferred bonus scheme. The data are from a company where agents work in teams and receive a bonus that depends on individual and team performance. Standard agency theory predicts that workers with productivity below the team average prefer a team bonus, while high‐productivity agents prefer an individual bonus. Risk aversion may temper the taste for individual pay. This model predicts the observed relationship between productivity and bonus preferences very well. There is, however, one pattern that it cannot explain: many low performers—especially men—prefer individual bonuses.