Pros

The laboratory offers a cheap and reliable method to identify causal relationships between incentives and effort, with a high qualitative external validity.

The anticipated impact of a change in compensation policies on employees’ effort and sorting can be identified in the laboratory.

Lab experiments can determine how reference points in terms of fair wage, comparison income, expectations, and goals influence the intensity of effort.

The importance of simultaneously studying the monetary and non-monetary sources of motivation to better understand how they interact can be demonstrated in a laboratory context.

The laboratory provides clean measures of peer effects on productivity and information on optimal performance feedback policies.