This paper shows that dynamic incentives in a workplace incentive scheme can be a shrouded attribute, due to contract complexity and worker bounded rationality. Field experiments in a firm find a weak response to dynamic incentives. A structural model with fully rational workers predicts a much stronger response, even accounting for other factors that might matter for worker responses. Online experiments with the same workers exclude such alternative factors by design, and again find a weak response, unless the scheme is simplified, or workers have high cognitive ability. Understanding online also predicts responding in the field experiments. Additional experiments with AMT workers replicate the results, and shed further light on mechanisms. The results (i) demonstrate that complexity affects effort provision and may allow firms to achieve better than second- best; (ii) show that incentive effects may depend on cognitive ability; (iii) shed light on mechanisms underlying complexity; and (iv) offer guidance for incentive design.
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