Relation of objective and subjective inputs to exchange preference for equity or equality reward allocation

Abstract

This study examines a possible synthesis between the equity and exchange theories concerning the pay-performance relationship. A combined experimental and survey design, in which subjects allocate rewards after receiving performance feedback, finds that the objective choice of the equality, equity, or winner-take-all exchange is associated with the observation of different types of exchange inputs. In particular, performance-related individual inputs such as score and ability are associated with the objective use of equity, while less relevant inputs such as cooperation lead to objective equality; only actual score was seen as significant by users of the winner-take-all exchange. A model of the pay-performance relationship is proposed, based on these and additional findings concerning chance and win/lose outcomes.