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The utility of pay raises/cuts: a simulation experimental study

journal contribution
posted on 2015-08-01, 00:00 authored by A Mitra, G D Jenkins Jr, N Gupta, Jason Shaw
Theories from the fields of psychophysics, economics, and organizational behavior are integrated to develop insights about people's attitudinal reactions to (i.e., the utility and disutility of) pay raises and pay cuts of different sizes. Linear, logarithmic, power, and quadratic functions are developed from this integration. Techniques for evaluating the empirical applicability of these utility/disutility relationships are illustrated among a sample of 192 student "employees" in an experimental simulation. The results provide a partial test of the integrated framework. The results indicate a quadratic relationship for pay raises and a linear relationship for pay cuts. Implications of these findings are discussed.

History

Journal

Journal of economic psychology

Volume

49

Pagination

150 - 166

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0167-4870

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2015, Elsevier B.V.