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Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment

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  • Delfgaauw, Josse

    ()
    (Erasmus University Rotterdam)

  • Dur, Robert

    ()
    (Erasmus University Rotterdam)

  • Non, Arjan

    ()
    (ROA, Maastricht University)

  • Verbeke, Willem

    ()
    (Erasmus University Rotterdam)

Abstract

We conduct a field experiment among 189 stores of a retail chain to study dynamic incentive effects of relative performance pay. Employees in the randomly selected treatment stores could win a bonus by outperforming three comparable stores from the control group over the course of four weeks. Treatment stores received weekly feedback on relative performance. Control stores were kept unaware of their involvement, so that their performance generates exogenous variation in the relative performance of the treatment stores. As predicted by theory, we find that treatment stores that lag far behind do not respond to the incentives, while the responsiveness of treatment stores close to winning a bonus increases in relative performance. On average, the introduction of the relative performance pay scheme does not lead to higher performance.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7652.

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Length: 38 pages
Date of creation: Sep 2013
Date of revision:
Publication status: published in: Labour Economics, 2014, 28, 1-13
Handle: RePEc:iza:izadps:dp7652

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Keywords: dynamic incentives; relative performance pay; field experiment;

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Cited by:
  1. Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2013. "Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment," IZA Discussion Papers 7652, Institute for the Study of Labor (IZA).
  2. Sebastian Goerg & Sebastian Kube, 2012. "Goals (th)at Work – Goals, Monetary Incentives, and Workers’ Performance," Working Paper Series of the Max Planck Institute for Research on Collective Goods, Max Planck Institute for Research on Collective Goods 2012_19, Max Planck Institute for Research on Collective Goods.
  3. Josse Delfgaauw & Robert Dur & Arjan Non & Willem Verbeke, 2011. "The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment," Tinbergen Institute Discussion Papers 11-120/1, Tinbergen Institute, revised 03 Oct 2013.

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