Incentivizing Creativity: A Large-Scale Experiment with Performance Bonuses and Gifts

This paper reports the results from a large-scale laboratory experiment that compared the impacts of a performance bonus and a wage gift on output from a creative task and a simple task. We find that the performance bonus substantially increases output in both the creative task and the simple task. By comparison, the wage gift increases output only in the simple task. Additional experimental treatments suggest that reciprocity in the creative task is inhibited because agents are uncertain about how their efforts affect the payments that accrue to the principal as a result of the agents’ work.