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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)

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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File URL: ftp://ftp.gate.cnrs.fr/RePEc/2008/0812.pdf
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Bibliographic Info

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
Date of revision:
Handle: RePEc:gat:wpaper:0812

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Related research

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

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References

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