Humans are fascinating creatures: Gift exchange edition

In a field experiment with 266 employees, we show that paying above market wages, per se, does not have an effect on effort. However, structuring a portion of the wage as a clear and unexpected gift (by hiring at a given wage, and then offering a raise with no further conditions after the employee has accepted the contract) does lead to persistently higher effort.

A new paper from Gilchrist, Luca, and Malhotra.

One thought on “Humans are fascinating creatures: Gift exchange edition

  1. Fascinating! This reminds me of the surprising failure of Ron Johnson’s JC Penny overhaul — apparently people love getting their dirt cheap clothes even cheaper than they expected when they got in line to pay.