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Negative Incentives Essay

1202 words - 5 pages

Negative incentives are any actions that discourage behavior or provide a resolution for unwanted behavior. One of the most common types of negative incentives is financial punishment. At one of my past jobs, Ace Hardware, the company engaged in profit sharing. Profit sharing is the distribution of profit among employees. Profit sharing is a positive incentive; however, I was more inclined to thrive in the workplace whenever my job was threatened. On one occasion, while I was working at Ace Hardware, I gave the wrong price on a piece of sheet metal resulting in a loss of profit for the company. I was punished by having a decrease of working hours that week. Since that incident I was careful not to give incorrect prices. I always double-checked the prices before I shared them with the customers.
Studies have been done to show that negative incentives are more effective in monetary situations. For example, a random pool of all people of all ages partook in an experiment involving solving anagrams. Half of the participants started off with money and were told that they would lose that money if they were incapable to solve the anagrams. The other half of the participants on the other hand, had to earn their money. The study concluded with the participants who were threatened to lose their initial money being more effective than their counterpart participants. A website,, allows people to make commitment contracts in order people to reach any personal goals. The individuals filling out the commitment contracts place a monetary wager on the website, bound by a contract, and if that person fails to complete his or her goal, they lose the money that was originally wagered.
According to Kelly Goldsmith, an assistant marketing professor at Kellogg School of Management, and Ravi Dhar, a professor at Yale University, as humans age we tend to appreciate positive incentives over negative incentives. During our youth, predominantly younger than 35, negative incentives have a larger role in our lives than positive incentives. As we age, the need for survival diminishes and positive incentives slowly become a more enticing motivator. According to Goldsmith and Dhar’s research, an employee susceptible to be fired is a greater incentive than an apparent bonus. An experiment done by Goldsmith and Dhar demonstrated the point that negative incentives produce faster production without losing efficiency. In a study involving 64 undergraduate students, the participants were asked to solve for anagrams. Half of the participants earned ¢.25 cents each time that they solved an anagram. The other half of the participants were asked to solve the same anagrams; however, were given a $1.50 starting balance and for each anagrams they failed to solve, a quarter was taken away. The experiment concluded with all participants succeeding in solving the same amount of anagrams. The participants who were threatened to lose money at each failed...

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