This paper reports the results of experiments designed to test the theory of the optimal composition of prizes in contests. We find that while in the aggregate the behavior of our subjects is consistent with that predicted by the theory, such aggregate results mask an unexpected compositional effect on the individual level. While theory predicts that subject efforts are continuous and increasing functions of ability, the actual efforts of our laboratory subjects bifurcate. Low ability workers drop out and exert little or no effort while high ability subjects try too hard. This discontinuity, which is masked by aggregation, has significant consequences for behavior in organizations.
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Paper provided by New York University, Center for Experimental Social Science in its series Working Papers with number
0022.
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Tor Eriksson & Anders Poulsen & Marie-Claire Villeval, 2008.
"Feedback and Incentives : Experimental Evidence,"
Working Papers
0812, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
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