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Feedback and incentives: Experimental evidence

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Author Info

  • Tor Eriksson

    ()
    (Department of economics - University of Aarhus)

  • Anders Poulsen

    (School of economics - University of East Anglia)

  • Marie Claire Villeval

    ()
    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I)

Abstract

This paper experimentally investigates the impact of different pay schemes and relative performance feedback policies on employee effort. We explore three feedback rules: No feedback on relative performance, feedback given halfway through the production period, and continuously updated feedback. We use two pay schemes, a piece rate and a tournament. We find that overall feedback does not improve performance. In contrast to the piece-rate pay scheme there is in tournaments some evidence of positive peer effects in tournaments since the underdogs almost never quit the competition even when lagging significantly behind, and front runners do not slack off. But in both pay schemes relative performance feedback reduces the quality of the low performers' work; we refer to this as a "negative quality peer effect".

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File URL: http://halshs.archives-ouvertes.fr/docs/00/45/15/57/PDF/EPV_paper_28_July_09.pdf
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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00451557.

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Date of creation: 2009
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Publication status: Published, Labour Economics, 2009, 16, 6, pp. 679-688
Handle: RePEc:hal:journl:halshs-00451557

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00451557
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Related research

Keywords: Tournament; Piece rate; Peer effects; Feedback; Evaluation; Experiment;

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  1. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August.
  2. Kräkel, Matthias, 2008. "Emotions in tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 204-214, July.
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  4. Schotter, Andrew & Weigelt, Keith, 1992. "Asymmetric Tournaments, Equal Opportunity Laws, and Affirmative Action: Some Experimental Results," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 511-39, May.
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  7. Yildirim, Huseyin, 2005. "Contests with multiple rounds," Games and Economic Behavior, Elsevier, vol. 51(1), pages 213-227, April.
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  9. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away from Competition? Do Men Compete too Much?," Discussion Papers 04-030, Stanford Institute for Economic Policy Research.
  10. Masaki Aoyagi, 2003. "Information Feedback in a Dynamic Tournament," ISER Discussion Paper 0580, Institute of Social and Economic Research, Osaka University.
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  17. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  18. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 917-962, August.
  19. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
  20. Florian Ederer & Ernst Fehr, 2007. "Deception and Incentives. How Dishonesty Undermines Effort Provision," IEW - Working Papers 341, Institute for Empirical Research in Economics - University of Zurich.
  21. Müller, W. & Schotter, A., 2003. "Workaholics and Drop Outs in Optimal Organizations," Discussion Paper 2003-43, Tilburg University, Center for Economic Research.
  22. Haraguchi, Kelii H. & Waddell, Glen R., 2007. "Interdependency in Performance," IZA Discussion Papers 2944, Institute for the Study of Labor (IZA).
  23. Gürtler, Oliver & Harbring, Christine, 2007. "Feedback in Tournaments under Commitment Problems: Theory and Experimental Evidence," IZA Discussion Papers 3111, Institute for the Study of Labor (IZA).
  24. Alessandro Lizzeri & Margaret A. Meyer & Nicola Persico, 2002. "The Incentive Effects of Interim Performance Evaluations," Penn CARESS Working Papers 592e9328faf6e775bf331e1c0, Penn Economics Department.
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