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First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision

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  • David Gill

    (Department of Economics, Purdue University, West Lafayette, Indiana 47907)

  • Zdenka Kissová

    (OC&C Strategy Consultants, London EC4A 3AT, United Kingdom)

  • Jaesun Lee

    (Department of Economics and Finance, Tongji University, Shanghai, China)

  • Victoria Prowse

    (Department of Economics, Purdue University, West Lafayette, Indiana 47907)

Abstract

Rank-order relative-performance evaluation, in which pay, promotion, symbolic awards, and educational achievement depend on the rank of individuals in the distribution of performance, is ubiquitous. Whenever organizations use rank-order relative-performance evaluation, people receive feedback about their rank. Using a real-effort experiment, we aim to discover whether people respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit “first-place loving” and “last-place loathing”: that is, subjects work hardest after being ranked first or last. We discuss implications of our findings for the optimal design of performance feedback policies, workplace organizational structures, and incentives schemes.

Suggested Citation

  • David Gill & Zdenka Kissová & Jaesun Lee & Victoria Prowse, 2019. "First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision," Management Science, INFORMS, vol. 65(2), pages 494-507, February.
  • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:2:p:494-507
    DOI: 10.1287/mnsc.2017.2907
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    More about this item

    Keywords

    relative performance evaluation; relative performance feedback; rank order feedback; dynamic effort provision; real-effort experiment; flat wage; fixed wage; taste for rank; status seeking; social esteem; self-esteem; public feedback; private feedback;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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