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

Atul Mitra, G. Douglas Jenkins, Nina Gupta, Jason DeFrance Shaw

Research output: Journal article publicationJournal articleAcademic researchpeer-review

6 Citations (Scopus)

Abstract

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.
Original languageEnglish
Pages (from-to)150-166
Number of pages17
JournalJournal of Economic Psychology
Volume49
DOIs
Publication statusPublished - 1 Aug 2015

Keywords

  • Pay cuts
  • Pay raises
  • Utility and disutility

ASJC Scopus subject areas

  • Sociology and Political Science
  • Applied Psychology
  • Economics and Econometrics

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