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The Flipside of Comparative Payment Schemes

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  • Thomas Buser

    () (School of Economics, University of Amsterdam, 1001 NJ Amsterdam, Netherlands; and Tinbergen Institute, 1082 MS Amsterdam, Netherlands)

  • Anna Dreber

    () (Department of Economics, Stockholm School of Economics, SE-113 83 Stockholm, Sweden)

Abstract

Comparative payment schemes and tournament-style promotion mechanisms are pervasive in the workplace. We test experimentally whether they have a negative impact on people’s willingness to cooperate. Participants first perform in a simple task and then participate in a public goods game. The payment scheme for the task varies across treatment groups. Compared with a piece-rate scheme, individuals in a winner-takes-all competition are significantly less cooperative in the public goods game. A lottery treatment, where the winner is decided by luck, has the same effect. In a competition treatment with feedback, winners cooperate as little as participants in the other treatments, whereas losers cooperate even less. All three treatments lead to substantial losses in the realised social surplus from the public good while having no significant impact on performance. In a complementary experiment, we aim to shed light on the psychological mechanisms behind our results.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2257 . This paper was accepted by Teck-Hua Ho, behavioral economics .

Suggested Citation

  • Thomas Buser & Anna Dreber, 2016. "The Flipside of Comparative Payment Schemes," Management Science, INFORMS, vol. 62(9), pages 2626-2638, September.
  • Handle: RePEc:inm:ormnsc:v:62:y:2016:i:9:p:2626-2638
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    File URL: http://dx.doi.org/10.1287/mnsc.2015.2257
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    Cited by:

    1. Banerjee, Ritwik, 2018. "On the interpretation of World Values Survey trust question - Global expectations vs. local beliefs," European Journal of Political Economy, Elsevier, vol. 55(C), pages 491-510.
    2. Cárdenas, Juan Camilo & Dreber, Anna & von Essen, Emma & Ranehill, Eva, 2015. "Cooperativeness and competitiveness in children," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 59(C), pages 32-41.
    3. Banerjee, Ritwik, 2016. "Corruption, norm violation and decay in social capital," Journal of Public Economics, Elsevier, vol. 137(C), pages 14-27.
    4. repec:eee:pubeco:v:152:y:2017:i:c:p:143-153 is not listed on IDEAS
    5. Felix Koelle, 2016. "Affirmative Action and Team Performance," Discussion Papers 2016-20, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    6. Herrera, Helios & Reuben, Ernesto & Ting, Michael M., 2017. "Turf wars," Journal of Public Economics, Elsevier, vol. 152(C), pages 143-153.
    7. Felipe Augusto de Araujo & Erin Carbone & Lynn Conell-Price & Marli W. Dunietz & Ania Jaroszewicz & Rachel Landsman & Diego Lamé & Lise Vesterlund & Stephanie Wang & Alistair J. Wilson, 2015. "The Effect of Incentives on Real Effort: Evidence from the Slider Task," CESifo Working Paper Series 5372, CESifo Group Munich.
    8. Fehr, Dietmar & Rau, Hannes & Trautmann, Stefan & Xu, Yilong, 2018. "Inequality, Fairness and Social Capital," Discussion Paper 2018-023, Tilburg University, Center for Economic Research.
    9. repec:eee:joepsy:v:62:y:2017:i:c:p:50-62 is not listed on IDEAS
    10. Janna Ter Meer, 2014. "The indirect effect of monetary incentives on deception," Cologne Graduate School Working Paper Series 05-04, Cologne Graduate School in Management, Economics and Social Sciences.
    11. repec:eee:soceco:v:73:y:2018:i:c:p:1-10 is not listed on IDEAS

    More about this item

    Keywords

    economics; behavior and behavioral decision making; game theory and bargaining theory; comparative pay; competition; cooperation; gender differences; incentive schemes;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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