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Feedback and Incentives : Experimental Evidence

  • Tor Eriksson

    ()

    (Aarhus School of Business, Aarhus University, Department of Economics and Center for Corporate Performance)

  • Anders Poulsen

    ()

    (School of Economics, University of East Anglia)

  • Marie-Claire Villeval

    ()

    (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France)

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated feedback. The pay schemes are a piece rate payment scheme and a winner-takes-all tournament. We find that, regardless of the pay scheme used, feedback does not improve performance. There are no significant peer effects in the piece-rate pay scheme. In contrast, in the tournament scheme we find some evidence of positive peer effects since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off. Moreover, in both pay schemes information feedback reduces the quality of the low performers’ work.

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Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0812.

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Length: 42 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:gat:wpaper:0812
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  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.
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  15. Kräkel, Matthias, 2008. "Emotions in tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 204-214, July.
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  17. Masaki Aoyagi, 2003. "Information Feedback in a Dynamic Tournament," ISER Discussion Paper 0580, Institute of Social and Economic Research, Osaka University.
  18. Jonathan Guryan & Kory Kroft & Matthew J. Notowidigdo, 2009. "Peer Effects in the Workplace: Evidence from Random Groupings in Professional Golf Tournaments," American Economic Journal: Applied Economics, American Economic Association, vol. 1(4), pages 34-68, October.
  19. Brad M. Barber & Terrance Odean, 2001. "Boys will be Boys: Gender, Overconfidence, and Common Stock Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 261-292.
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