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On the merit of equal pay: Performance manipulation and incentive setting

Author

Listed:
  • Brice Corgnet

    (EM - EMLyon Business School, GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

  • Ludivine Martin

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, LISER - Luxembourg Institute of Socio-Economic Research)

  • Peguy Ndodjang

    (UPVD - Université de Perpignan Via Domitia)

  • Angela Sutan

    (BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC))

Abstract

Work performance is often difficult to assess thus leaving room for manipulation of commonly-used metrics. We created a laboratory workplace in which we can precisely assess both work performance along with manipulation activities. Using two independent experiments we show that, whenever pay for performance is used, manipulation is pervasive leading to both a waste of organizational resources and a weakening of incentives. By contrast, paying organizational members equally effectively deters manipulation attempts leading to higher organizational production.

Suggested Citation

  • Brice Corgnet & Ludivine Martin & Peguy Ndodjang & Angela Sutan, 2019. "On the merit of equal pay: Performance manipulation and incentive setting," Post-Print halshs-02393577, HAL.
    • Handle: RePEc:hal:journl:halshs-02393577
    DOI: 10.1016/j.euroecorev.2018.12.006
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    Cited by:

    1. Simon Dato & Eberhard Feess & Petra Nieken, 2022. "Lying in Competitive Environments: A Clean Identification of Behavioral Impacts," CESifo Working Paper Series 9861, CESifo.
    2. Dato, Simon & Feess, Eberhard & Nieken, Petra, 2024. "Lying in competitive environments: Identifying behavioral impacts," European Economic Review, Elsevier, vol. 170(C).
    3. Awaya, Yu & Do, Jihwan, 2022. "Incentives under equal-pay constraint and subjective peer evaluation," Games and Economic Behavior, Elsevier, vol. 135(C), pages 41-59.
    4. Werner, Peter, 2023. "Wage negotiations and strategic responses to transparency," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 161-175.

    More about this item

    Keywords

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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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