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Strive to be First or Avoid Being Last: An Experiment on Relative Performance Incentives

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  • Dutcher, E. Glenn

    () (University of Central Missouri)

  • Balafoutas, Loukas

    () (University of Innsbruck)

  • Lindner, Florian

    () (University of Innsbruck)

  • Ryvkin, Dmitry

    () (Florida State University)

  • Sutter, Matthias

    () (Max Planck Institute for Research on Collective Goods)

Abstract

We utilize a laboratory experiment to compare effort provision under optimal tournament contracts with different distributions of prizes which motivate agents to compete to be first, avoid being last, or both. We find that the combined tournament contract incorporating both incentives at the top and at the bottom induces the highest effort, especially in larger groups. Avoiding being last produces the lowest variance of effort and is more effective at motivating employees compared to competing for the top.

Suggested Citation

  • Dutcher, E. Glenn & Balafoutas, Loukas & Lindner, Florian & Ryvkin, Dmitry & Sutter, Matthias, 2015. "Strive to be First or Avoid Being Last: An Experiment on Relative Performance Incentives," IZA Discussion Papers 9330, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9330
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    Cited by:

    1. repec:eee:labeco:v:51:y:2018:i:c:p:294-306 is not listed on IDEAS
    2. Philip Brookins & John P. Lightle & Dmitry Ryvkin, 2015. "The effects of communication and sorting on output in heterogeneous weak-link group contests," Working Papers wp2014_01_01, Department of Economics, Florida State University.
    3. Philip Brookins & Jennifer Brown & Dmitry Ryvkin, 2016. "Peer Information and Risk-taking under Competitive and Non-competitive Pay Schemes," NBER Working Papers 22486, National Bureau of Economic Research, Inc.
    4. Loukas Balafoutas & E. Glenn Dutcher & Florian Lindner & Dmitry Ryvkin, 2017. "The Optimal Allocation Of Prizes In Tournaments Of Heterogeneous Agents," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 461-478, January.
    5. Hermann, Daniel & Mußhoff, Oliver & Rau, Holger A., 2017. "The disposition effect when deciding on behalf of others," Center for European, Governance and Economic Development Research Discussion Papers 332, University of Goettingen, Department of Economics.
    6. Boosey, Luke & Brookins, Philip & Ryvkin, Dmitry, 2017. "Contests with group size uncertainty: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 105(C), pages 212-229.
    7. repec:spr:jesaex:v:4:y:2018:i:1:d:10.1007_s40881-018-0052-7 is not listed on IDEAS
    8. repec:eee:jeborg:v:142:y:2017:i:c:p:11-23 is not listed on IDEAS

    More about this item

    Keywords

    experiment; contract; loser; winner; tournament; learning;

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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