This study posits that the concept of loss aversion from prospect theory could complement existing theories on performance-based pay systems, such as expectancy theory. Focusing on individual performance-based pay, it examines the effects of such a sy...
This study posits that the concept of loss aversion from prospect theory could complement existing theories on performance-based pay systems, such as expectancy theory. Focusing on individual performance-based pay, it examines the effects of such a system on job satisfaction, specifically assessing whether the impact of performance-based pay varies according to the levels of intrinsic and extrinsic motivation associated with a job. Numerous prior studies have confirmed that performance-based pay has a positive effect on job satisfaction, interpreting these results based on expectancy theory. However, this study contends that it is more appropriate to view job satisfaction as the outcome of complex psychological tendencies. It hypothesizes that the influence of loss aversion related to performance-based pay may vary depending on the levels of intrinsic and extrinsic motivation of the job. This suggests that the effects of performance-based pay on job satisfaction may differ based on these motivational levels. Consequently, this study examines the differential impact of performance-based pay on job satisfaction across varying levels of intrinsic and extrinsic job motivation and provides theoretical and policy implications based on the analysis results.