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Prof. Xiaolin Li
Assistant Professor of Marketing
The London School of Economics and Political Science
The University of London

ABSTRACT

This paper examines the effects of incentive plans on the quantity and quality of creative production. We study a serial publishing platform which switched from a uniform commission plan to a quantity-based incentive plan offering higher commission rates if a writer’s production meets higher quantity brackets. Our analysis shows that, for a given book, the chapters published in the time periods when writers reached higher brackets of quantity (hence higher commission rates) had higher quality measured by chapter-to-chapter customer retention rates. Such a positive correlation is not significant in books published when the platform offered a uniform commission plan. We theorize that the quantity-based commission plan can enhance the quantity-quality complementarity in a writer’s payoff function. With the enhanced complementarity, the creators who reach a higher bracket of quantity will produce a higher quality under a quantity-based plan than under a uniform commission plan. Further empirical analysis indicates that the degree of enhanced complementarity is weaker for the writers who earn commissions from multiple books. Overall, our results underscore the importance of proper incentive design in improving the platform’s performance in managing mass creativity.