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The Impact Of Pay Comparisons On Effort Behavior

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  • Daniele Nosenzo

    (University of Nottingham)

Abstract

This study uses a three-person gift-exchange game experiment to examine the impact of pay comparisons on effort behavior. We compare effort choices made in a treatment where coworkers’ wages are secret with effort choices made in two ‘public wages’ treatments. The two ‘public wages’ treatments differ in whether co-workers’ wages are chosen by an employer, or are fixed exogenously by the experimenter. We find that pay comparison information has an overall detrimental impact on effort choices: employees respond less favorably to the wage offers made by the employer when they receive information about the wage paid to the co-worker as compared to the case where co-workers’ wages are secret. These effects are particularly pronounced in the treatment where the level of the co-worker’s wage is fixed exogenously.

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Bibliographic Info

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2010-03.

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Date of creation: Mar 2010
Date of revision:
Handle: RePEc:cdx:dpaper:2010-03

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Keywords: social comparisons; wage comparisons; gift exchange; experiments;

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Cited by:
  1. Gächter, Simon & Nosenzo, Daniele & Sefton, Martin, 2012. "Peer Effects in Pro-Social Behavior: Social Norms or Social Preferences?," IZA Discussion Papers 6345, Institute for the Study of Labor (IZA).
  2. Simon Gaechter & Daniele Nosenzo & Martin Sefton, 2008. "The Impact of Social Comparisons on Reciprocity," Discussion Papers 2008-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

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