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A General Test of Gaming

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  • Gerald Marschke
  • Pascal Courty

Abstract

An important lesson from the incentive literature is that explicit incentives may elicit dysfunctional and unintended responses, also known as gaming responses. The existence of these responses, however, is difficult to demonstrate in practice because this behavior is typically hidden from the researcher. We present a simple model showing that one can identify gaming by estimating the correlation between a performance measure and the true goal of the organization before and after the measure has been activated. Our hypothesis is that gaming takes place if this correlation decreases with activation. Using data from a public sector organization, we find evidence consistent with our hypothesis. We draw implications for the selection of performance measures.

Suggested Citation

  • Gerald Marschke & Pascal Courty, 2004. "A General Test of Gaming," Discussion Papers 04-04, University at Albany, SUNY, Department of Economics.
    • Handle: RePEc:nya:albaec:04-04
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    File URL: http://www.albany.edu/economics/research/workingp/2004/gaming.pdf
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    More about this item

    Keywords

    Performance Incentive; Performance Measurement; Gaming; Multitasking; Government Organization.;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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