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Feedback and incentives: Experimental evidence

  • Eriksson, Tor
  • Poulsen, Anders
  • Villeval, Marie Claire

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 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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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 16 (2009)
Issue (Month): 6 (December)
Pages: 679-688

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Handle: RePEc:eee:labeco:v:16:y:2009:i:6:p:679-688
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. 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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  4. Leonard Daniel & Long Ngo Van, 2012. "IS EMULATION GOOD FOR YOU? THE UPs AND DOWNs OF RIVALRY," Global Journal of Economics (GJE), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1250003-1-1.
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  6. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  7. Maria Goltsman & Arijit Mukherjee, 2011. "Interim Performance Feedback in Multistage Tournaments: The Optimality of Partial Disclosure," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 229 - 265.
  8. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  9. Masaki Aoyagi, 2003. "Information Feedback in a Dynamic Tournament," ISER Discussion Paper 0580, Institute of Social and Economic Research, Osaka University.
  10. Ederer, Florian & Fehr, Ernst, 2007. "Deception and Incentives: How Dishonesty Undermines Effort Provision," IZA Discussion Papers 3200, Institute for the Study of Labor (IZA).
  11. Catherine C. Eckel & Philip J. Grossman, 2008. "Forecasting Risk Attitudes: An Experimental Study Using Actual and Forecast Gamble Choices," Monash Economics Working Papers archive-01, Monash University, Department of Economics.
  12. 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.
  13. Dan Ariely & Uri Gneezy & George Loewenstein & Nina Mazar, 2005. "Large stakes and big mistakes," Working Papers 05-11, Federal Reserve Bank of Boston.
  14. Kräkel, Matthias, 2008. "Emotions in tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 204-214, July.
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  17. repec:dgr:kubcen:200343 is not listed on IDEAS
  18. Gershkov, Alex & Perry, Motty, 2009. "Tournaments with midterm reviews," Games and Economic Behavior, Elsevier, vol. 66(1), pages 162-190, May.
  19. Gürtler, Oliver & Harbring, Christine, 2007. "Feedback in Tournaments under Commitment Problems: The-ory and Experimental Evidence," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 219, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  20. 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.
  21. Yildirim, Huseyin, 2005. "Contests with multiple rounds," Games and Economic Behavior, Elsevier, vol. 51(1), pages 213-227, April.
  22. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  23. Alessandro Lizzeri & Margaret A. Meyer & Nicola Persico, 2002. "The Incentive Effects of Interim Performance Evaluations," Penn CARESS Working Papers 592e9328faf6e775bf331e1c0, Penn Economics Department.
  24. Brad M. Barber & Terrance Odean, 2001. "Boys Will Be Boys: Gender, Overconfidence, And Common Stock Investment," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 261-292, February.
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