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Feedback and Incentives: Experimental Evidence

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Author Info
Eriksson, Tor () (Aarhus School of Business)
Poulsen, Anders () (University of East Anglia)
Villeval, Marie-Claire () (CNRS, GATE)

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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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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3440.

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Length: 42 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3440

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Related research
Keywords: performance pay; tournament; piece rate; peer effects; information; feedback; evaluation; experiment;

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Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
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
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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References listed on IDEAS
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.:
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    Other versions:
  2. Alessandro Lizzeri & Margaret A. Meyer & Nicola Persico, 2002. "The Incentive Effects of Interim Performance Evaluations," Penn CARESS Working Papers 592e9328faf6e775bf331e1c0, Penn Economics Department. [Downloadable!]
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  4. Alexandre Mas & Enrico Moretti, 2006. "Peers at Work," IZA Discussion Papers 2292, Institute for the Study of Labor (IZA). [Downloadable!]
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  5. 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.
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  6. Jonathan Guryan & Kory Kroft & Matt Notowidigdo, 2007. "Peer Effects in the Workplace: Evidence from Random Groupings in Professional Golf Tournaments," NBER Working Papers 13422, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Alex Gershkov & Motty Perry, 2006. "Tournaments with Midterm Reviews," Levine's Bibliography 122247000000001229, UCLA Department of Economics. [Downloadable!]
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  9. 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. [Downloadable!] (restricted)
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  11. Florian Ederer & Ernst Fehr, 2007. "Deception and Incentives: How Dishonesty Undermines Effort Provision," IZA Discussion Papers 3200, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. 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. [Downloadable!] (restricted)
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  13. Muller, W. & Schotter, A., 2003. "Workaholics and drop outs in optimal organizations," Discussion Paper 43, Tilburg University, Center for Economic Research. [Downloadable!]
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  14. Thomas J. Dohmen, 2005. "Do Professionals Choke Under Pressure?," IZA Discussion Papers 1905, Institute for the Study of Labor (IZA). [Downloadable!]
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  15. Yildirim, Huseyin, 2005. "Contests with multiple rounds," Games and Economic Behavior, Elsevier, vol. 51(1), pages 213-227, April. [Downloadable!] (restricted)
  16. 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. [Downloadable!] (restricted)
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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. Ghazala Azmat & Nagore Iriberri, 2009. "The Importance of Relative Performance Feedback Information: Evidence from a Natural Experiment using High School Students," CEP Discussion Papers dp0915, Centre for Economic Performance, LSE. [Downloadable!]
  2. Randolph Sloof & C. Mirjam van Praag, 2008. "The Effect of Noise in a Performance Measure on Work Motivation," Tinbergen Institute Discussion Papers 08-074/1, Tinbergen Institute. [Downloadable!]
  3. Ghazala Azmat & Nagore Iriberri, 2009. "The Importance of Relative Performance Feedback Information: Evidence from a Natural Experiment using High School Students," Economics Working Papers 1148, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2009. [Downloadable!]
  4. Jason M. Lindo & Nicholas J. Sanders & Philip Oreopoulos, 2008. "Ability, Gender, and Performance Standards: Evidence from Academic Probation," NBER Working Papers 14261, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Kuhnen, Camelia M. & Tymula, Agnieszka, 2008. "Rank expectations, feedback and social hierarchies," MPRA Paper 13428, University Library of Munich, Germany, revised Jan 2009. [Downloadable!]
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