How does the preference for increasing payments depend on the size and source of the payments?

Management Science Letters. 2015;5(12):1071-1080 DOI 10.5267/j.msl.2015.10.007


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Journal Title: Management Science Letters

ISSN: 1923-9335 (Print); 1923-9343 (Online)

Publisher: Growing Science

LCC Subject Category: Social Sciences: Commerce: Business: Business records management

Country of publisher: Canada

Language of fulltext: English

Full-text formats available: PDF



Sean Duffy
John Smith
Kristen Woods


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Time From Submission to Publication: 20 weeks


Abstract | Full Text

It is well-known that subjects can exhibit a preference for increasing payments. Smith (2009a) [Smith, J. (2009a). Imperfect Memory and the Preference for Increasing Payments. Journal of Institutional and Theoretical Economics, 165(4), 684-700.] makes a related prediction that the difference between the preference for increasing wage payments and the preference for increasing non-wage payments will be largest for intermediate payments. We find evidence consistent with this prediction. Consistent with previous experiments, we find that the preference for increasing payments is increasing in the size of the payments. Also consistent with the literature, we find that the preference for increasing wage payments is stronger than the preference for non-wage payments. Our results contribute to the understanding of the optimal sequencing of wage payments over time.