Saturday, May 6, 2017

Huck, Szech, and Wenner (2015) on Information Avoidance; or, Am I Getting Paid Enough to Finish this Outline?

Steffen Huck, Nora Szech, and Lukas M. Wenner, “More Effort with Less Pay: On Information Avoidance, Belief Design and Performance.” CESifo Working Paper No. 5542, October, 2015 (pdf).

• If information can influence your expectations and motivations, you might want to avoid acquiring information. For instance, knowing that there are high stakes riding on your performance might lead you to choke under the pressure. This paper reports on an experiment that tests whether people might choose to avoid information about their precise (piece-rate) wage. 

• The experiment is of the “real effort” variety, that is, subjects are asked to engage in a tedious, painstaking task: typing 60-character nonsensical alphanumeric strings, mixed uppercase and lowercase, backwards into a computer. For each correctly typed string, a piece rate is paid, and the subjects have one hour in which to type (or not, as they wish). In case they want to not work, they have a magazine at hand to help pass the hour. 

• The piece rate is random; with probability .5, it is quite low – .1 euro per string – and with probability .5 it is significant: 1 euro per string. The different conditions of the experiment turn on: whether the workers know their wage (Full Info); whether they choose to be or not to be informed of their wage until after the work hour is over (Info Choice); and whether they have no option but to remain uninformed (No Info). A fourth condition is where workers know that their wage is .55 euro per string, which is the weighted average of the high and low piece rates, and hence might serve as the expected wage for workers who do not know their wage. 

• Not surprisingly, if you know your wage, you work harder if the wage is high than if it is low (and you work at an in-between rate if you know you earn the medium wage). If you get to decide whether or not to be told your wage, well, 30 out of 95 subjects choose not to be told. These uninformed folks work like machines, even outpacing subjects who know they have a high piece rate.

• Perhaps those subjects who choose not to learn their wage rate happen to be really productive workers, that is, maybe the option of not knowing the wage within the Info Choice group selects for the best workers. This possibility is tested by the No Info treatment, where subjects don’t know their piece rate in advance, but not by choice: they are not given the option of learning their wage. But these subjects also perform at a very high level, so selection effects don’t seem to drive the result: not possessing wage information tends to bolster productivity. 

• When asked about their decisions, those subjects who choose to learn their piece rate in advance tend to explicitly note their interest in tailoring their effort to the rate. Those who choose not to learn their piece rate tend to mention the effect that a low rate would have on their motivation, and/or a fear that a high rate might lead to anxiety. 

• The authors adapt a model of Brunnermeier and Parker (2005; pdf here) to indicate that a high piece rate can both increase the revenue from effort, and also increase the costs of supplying effort: a high rate might induce anxiety, for instance. Further, agents receive utility not just from what happens today but also some utility (today) from anticipation of what is likely to happen next period. The anticipation utility provides a channel for utility-maximizing agents to hold biased beliefs, overoptimistic views of what the future will bring. With a high enough anticipatory utility, agents will prefer to avoid knowledge of their wage: they are information avoiders.

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