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Feedback and Incentives : Experimental Evidence

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Author Info
Tor Eriksson () (Aarhus School of Business, Aarhus University, Department of Economics and Center for Corporate Performance)
Anders Poulsen () (School of Economics, University of East Anglia)
Marie-Claire Villeval () (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France)

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Abstract

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated feedback. The pay schemes are a piece rate payment scheme and a winner-takes-all tournament. We find that, regardless of the pay scheme used, feedback does not improve performance. There are no significant peer effects in the piece-rate pay scheme. In contrast, in the tournament scheme we find some evidence of positive peer effects since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off. Moreover, in both pay schemes information feedback reduces the quality of the low performers’ work.

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Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0812.

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Length: 42 pages
Date of creation: 2008
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Handle: RePEc:gat:wpaper:0812

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Keywords: evaluation feedback information laboratory experiments peer effects performance pay piece rate tournament

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Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lahiri, Soumitra, 2007. "World War Iii A Techno Economic Introspection," MPRA Paper 8183, University Library of Munich, Germany. [Downloadable!]
  2. Winter, Peter, 2007. "Managerial Risk Accounting and Control – A German perspective," MPRA Paper 8185, University Library of Munich, Germany. [Downloadable!]
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  5. Kaufmann, Daniel & Kraay, Aart, 2007. "On Measuring Governance: Framing Issues for Debate," MPRA Paper 8187, University Library of Munich, Germany. [Downloadable!]
  6. Tor Eriksson & Sabrina Teyssier & Marie-Claire Villeval, 2006. "Effort Self-Selection and the Efficiency of Tournaments," Post-Print halshs-00142876_v1, HAL. [Downloadable!]
  7. Nath, Sushmit, 2007. "Religion & Economic Growth and Development," MPRA Paper 8181, University Library of Munich, Germany. [Downloadable!]
  8. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2004. "Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain-sharing Incentives on the Job Satisfaction of British Employees," MPRA Paper 1629, University Library of Munich, Germany, revised 31 Jan 2007. [Downloadable!]
  9. Grund, Christian & Westergaard-Nielsen, Niels, 2004. "The Dispersion of Employees’ Wage Increases and Firm Performance," IZA Discussion Papers 1402, Institute for the Study of Labor (IZA). [Downloadable!]
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  10. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2008. "Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts," Discussion Papers 08-06, University of Copenhagen. Department of Economics. [Downloadable!]
  11. Tor Eriksson & Sabrina Teyssier & Marie-Claire Villeval, 2006. "Self-Selection and the Efficiency of Tournaments," Working Papers 0603, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
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  12. Kaufmann, Daniel & Vicente, Pedro C., 2005. "Legal Corruption," MPRA Paper 8186, University Library of Munich, Germany. [Downloadable!]
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