TY - JOUR
T1 - When Transparency Fails: Financial Incentives for Local Banking Agents in Indonesia
AU - Deserranno, Erika
AU - León-Ciliotta, Gianmarco
AU - Kartaadipoetra, Firman
PY - 2023
Y1 - 2023
N2 - We study the effect of raising the level and transparency of financial incentives offered to local agents for acquiring clients of a new banking product on take-up. We find that paying agents higher incentives increases take-up and usage, but only when the incentives are unknown to prospective clients. When disclosed, higher incentives have no effect on take-up and usage, despite greater agent effort. This is due to the financial incentives sending a negative signal to potential clients about the reliability and trustworthiness of the product. Hence, when designing incentives, organizations should consider both their level and transparency.
AB - We study the effect of raising the level and transparency of financial incentives offered to local agents for acquiring clients of a new banking product on take-up. We find that paying agents higher incentives increases take-up and usage, but only when the incentives are unknown to prospective clients. When disclosed, higher incentives have no effect on take-up and usage, despite greater agent effort. This is due to the financial incentives sending a negative signal to potential clients about the reliability and trustworthiness of the product. Hence, when designing incentives, organizations should consider both their level and transparency.
U2 - 10.1162/rest_a_01359
DO - 10.1162/rest_a_01359
M3 - Article
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
ER -