Which Incentives Work and When? An Experimental Analysis of Incentives for Trainers

One conjecture in the theory of incentives is that incentives based on broader outcomes may be better at motivating agents than incentives based on narrow measures. A more nuanced statement of this conjecture is that incentives of different breadth are appropriate for different agents. We designed an experiment to test these hypotheses. We allocated participating SME entrepreneurs to 26, simultaneous training sessions in the Philippines and gave the trainers incentives based on the average score of their students on standardized tests. We then examined outcomes based on participant satisfaction ratings of the trainer. Our results suggest that incentives based on broad outcomes are more effective than incentives based on narrow outcomes for trainers of average or above average ability. However, all incentives might improve outcomes for the less capable trainers.