Paying More for Less: Understanding the Correlation between Big Payment and Work Performance

About a year ago, I wrote a short article on whether there is any relationship between guaranteed high bonus and excessive risk taking by the management of a company. You can see the post here . Basically, such guaranteed high bonus gives a negative incentive to the board of directors to take higher risks in order to gain better benefit for the company. While higher risks might be translated into higher profits, they can also cause higher costs and losses which would trouble the company and the shareholders. In other words, big payment might actually produce worse results. Apparently, Dan Ariely, a Professor of Psychology and Behavioral Economics at Duke University, has a similar view on this issue, though he reached the conclusion from different perspective. In his latest book, The Upside of Irrationality, he discusses his experiment which more or less shows that higher payment does not always work. The experiment was conducted in India, where several participants were asked to pl