Economic Model of Behaviour


The employee’s work behavior is influenced by economic model of behaviour. The research focuses on the effect of rewards on the workers’ willingness to produce more outputs. The research concentrates on the ill effects of forcing the employees to exceed normal output for the sake of rewards. Rewards may not be beneficial to most employees.

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Effects of the Reward System

The article, Why Incentive Plans Cannot Work, is very informative (Kohn 1993). Salvatore (1996) emphasized that economic behavior the effect of one independent variable (incentives) over dependent variables (commission, promotion, regularization, others). The article correctly states that majority of the employees will increase their production output to win the award, promotion, or commission alone.

However, many benchmark achievers do not have the eagerness or willingness to comply with preset benchmarks. The rewards and other perks will only achieve temporary or half-hearted obedience. However, when the employee gets the prize, he or she returns to the old or normal way of doing things. Under pressure, the employees generally forget their creativity and imagination. Basically, the economic behavior model in the workplace is grounded on one principle: the worker will be paid his due for each production output.

The article correctly states that animosity, sadness, anger, and discouragement are some of the side effects of the reward or incentive system (Kohn 1993). Armstrong (2007) emphasized that each incentive program produces a few winners and several losers. In effect, the losers are indirectly being punished for not reaching the established production, service, or other preset benchmarks. Jackson (2008) theorized that the average employee may not be able to comply with the rewards system benchmarks. Thus, some company rewards policies offer a series of rewards or incentives for different levels of achievement. The plan is a better carrot device to increase worker compliance to the incentive requirements.

Further Discussion: Behavioral Model of Economics

Grandori (2001) insists that behavioral economists rely heavily on theory and on observational studies to predict employee behavior. For example, economic behavior theorists emphasise that the workers’ basic wants, caprices, and needs drive the workers to reach the established benchmarks. However, the cost of the rewards system may have a heavy toll on the workers’ health and overall performance as stress sets in. Behavioral economics and finance theories are generated from experimental observations as well as survey responses. The study of the behavioral economic model entails the use of repeated experiments as a basis for validating or discarding prior hypothesis on employee behavior within the organizational environment.

As proof, Kohn (1993) rightfully emphasized that the welders from Midwestern manufacturing Company generated higher outputs without an incentive scheme when compared to their production output during the incentive scheme implementation. The article correct states that offering rewards generates temporary and uncomfortable commitment to the company’s increase benchmarks.


In a nutshell, rewards may not be advantageous to most employees. Each person works to fill one’s needs, wants, and caprices. Rewards may be deleterious to the entire work force. It creates envy, animosity, and division among the winning and the losing workers. The workers work to win the price; they are forced to overproduce against their free will. Some workers produce more because they freely want to produce more. Clearly, the worker is affected by the economic model of behavior.

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Armstrong, M., (2007) A Handbook of Employee Reward Management and Practice. London, Kogan Press.

Grandori, A., (2001) Organisation and Economic Behaviour. London, Routledge Press.

Jackson, S., (2008) Managing Human Resources, London, Cengage Learning Press.

Salvatore, D., (1996) Schaum’s Outline of Theory and Problems of Principles of Economics. London, McGraw-Hill Press.

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