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Feedback and incentives: Experimental evidence

  • Tor Eriksson

    ()

    (Department of economics - University of Aarhus)

  • Anders Poulsen

    (School of economics - University of East Anglia)

  • Marie Claire Villeval

    ()

    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I)

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 in tournaments 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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Paper provided by HAL in its series Post-Print with number halshs-00451557.

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Date of creation: 2009
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Publication status: Published, Labour Economics, 2009, 16, 6, pp. 679-688
Handle: RePEc:hal:journl:halshs-00451557
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00451557
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  17. Ederer, Florian & Fehr, Ernst, 2007. "Deception and Incentives: How Dishonesty Undermines Effort Provision," IZA Discussion Papers 3200, Institute for the Study of Labor (IZA).
  18. Kräkel, Matthias, 2008. "Emotions in tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 204-214, July.
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  24. 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.
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