Resumen de Bonus payments and reference point violations

Axel Ockenfels, Dirk Sliwka, Peter Werner

• We investigate how bonus payments affect the satisfaction and performance of managers in a large multinational company. We find that falling behind a natural reference standard for a fair bonus payment (a “reference point violation”) reduces satisfaction and subsequent performance. The effects are mitigated if information about one’s relative standing toward the reference point is withheld. A model and a laboratory experiment provide complementary insights and additional robustness checks.