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Performance thresholds, effort and risk-taking

Campos-Mercade, Pol LU ; Currarini, Sergio ; Marchiori, Carmen and Mengel, Friederike LU (2026) In European Economic Review 187.
Abstract

We study, theoretically and experimentally, the impact of performance thresholds on effort and risk-taking. Our theory predicts that thresholds typically increase effort provision, but that the magnitude of this increase varies non-monotonically with the threshold level. For risk-taking, the effects are positive for high thresholds and negative for low thresholds. We characterize these patterns through the subtle interplay between effort and risk, which transition from complements to substitutes as thresholds become more demanding. Our experiment (N=1092) supports the theoretical predictions, showing that high thresholds raise both effort and risk-taking, whereas more moderate thresholds raise effort but lower risk-taking. Importantly,... (More)

We study, theoretically and experimentally, the impact of performance thresholds on effort and risk-taking. Our theory predicts that thresholds typically increase effort provision, but that the magnitude of this increase varies non-monotonically with the threshold level. For risk-taking, the effects are positive for high thresholds and negative for low thresholds. We characterize these patterns through the subtle interplay between effort and risk, which transition from complements to substitutes as thresholds become more demanding. Our experiment (N=1092) supports the theoretical predictions, showing that high thresholds raise both effort and risk-taking, whereas more moderate thresholds raise effort but lower risk-taking. Importantly, the experiment sheds light on the crucial role of individual heterogeneity: because individuals have different baseline performances, the same threshold can be perceived as high by some and low by others, producing opposite behavioral responses. The analysis highlights that effective threshold design must understand not only how thresholds shape effort and risk-taking, but also the characteristics of the targeted population.

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author
; ; and
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Effort, Performance-based thresholds, Risk-taking
in
European Economic Review
volume
187
article number
105363
publisher
Elsevier
external identifiers
  • scopus:105038665635
ISSN
0014-2921
DOI
10.1016/j.euroecorev.2026.105363
language
English
LU publication?
yes
additional info
Publisher Copyright: Copyright © 2026. Published by Elsevier B.V.
id
6dadd6e6-e250-420e-8cf3-60890fdb8fd0
date added to LUP
2026-08-11 09:35:55
date last changed
2026-08-11 09:36:47
@article{6dadd6e6-e250-420e-8cf3-60890fdb8fd0,
  abstract     = {{<p>We study, theoretically and experimentally, the impact of performance thresholds on effort and risk-taking. Our theory predicts that thresholds typically increase effort provision, but that the magnitude of this increase varies non-monotonically with the threshold level. For risk-taking, the effects are positive for high thresholds and negative for low thresholds. We characterize these patterns through the subtle interplay between effort and risk, which transition from complements to substitutes as thresholds become more demanding. Our experiment (N=1092) supports the theoretical predictions, showing that high thresholds raise both effort and risk-taking, whereas more moderate thresholds raise effort but lower risk-taking. Importantly, the experiment sheds light on the crucial role of individual heterogeneity: because individuals have different baseline performances, the same threshold can be perceived as high by some and low by others, producing opposite behavioral responses. The analysis highlights that effective threshold design must understand not only how thresholds shape effort and risk-taking, but also the characteristics of the targeted population.</p>}},
  author       = {{Campos-Mercade, Pol and Currarini, Sergio and Marchiori, Carmen and Mengel, Friederike}},
  issn         = {{0014-2921}},
  keywords     = {{Effort; Performance-based thresholds; Risk-taking}},
  language     = {{eng}},
  publisher    = {{Elsevier}},
  series       = {{European Economic Review}},
  title        = {{Performance thresholds, effort and risk-taking}},
  url          = {{http://dx.doi.org/10.1016/j.euroecorev.2026.105363}},
  doi          = {{10.1016/j.euroecorev.2026.105363}},
  volume       = {{187}},
  year         = {{2026}},
}