A General Test of Gaming
AbstractAn important lesson from the incentive literature is that explicit incentives may elicit dysfunctional and unintended responses, also known as gaming responses. The existence of these responses, however, is difficult to demonstrate in practice because this behaviour is typically hidden from the researcher. We present a simple model showing that one can identify gaming by estimating the correlation between a performance measure and the true goal of the organization before and after the measure has been activated. Our hypothesis is that gaming takes place if this correlation decreases with activation. Using data from a public sector organization, we find evidence consistent with our hypothesis. We draw implications for the selection of performance measures.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4514.
Date of creation: Aug 2004
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Other versions of this item:
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-13 (All new papers)
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