IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Performance Pay and the Erosion of Worker Cooperation: Field experimental evidence

  • Jeffrey Carpenter

    ()

  • Stephen Burks
  • Lorenz Götte

We report the results of a field experiment with bicycle messengers in Switzerland and the United States. Messenger work is individualized enough that firms can choose to condition pay on it, but significant externalities in messenger behavior nonetheless give their on-the-job interactions the character of a social dilemma. Firms therefore suffer efficiency losses when messengers fail to cooperate. Second-mover behavior in our sequential Prisoner’s Dilemma allows us to characterize the cooperativeness of our participants. We find that messengers, like our student controls, have heterogeneous social preferences, but are much more cooperative than students. Among messengers, we find that employees at firms that pay for performance are significantly less cooperative than those who are paid hourly or are members of cooperatives. To examine whether the difference is the result of treatment or selection we exploit the fact that firm type is location-specific in Switzerland and that entering messengers must work in performance pay firms in the U.S. We find that the erosion of cooperation under performance pay is predominantly due to treatment, and that the treatment effect is relatively rapid, more akin to the differential cueing of a behavioral norm than the gradual acquisition of a new preference.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.middlebury.edu/services/econ/repec/mdl/ancoec/0603.pdf
Download Restriction: no

Paper provided by Middlebury College, Department of Economics in its series Middlebury College Working Paper Series with number 0603.

as
in new window

Length: 24 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:mdl:mdlpap:0603
Contact details of provider:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
  2. John List, 2004. "Young, selfish, and male: Field evidence of social preferences," Natural Field Experiments 00298, The Field Experiments Website.
  3. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
  4. Carpenter, Jeffrey P. & Burks, Stephen V. & Verhoogen, Eric, 2004. "Comparing Students to Workers: The Effects of Social Framing on Behavior in Distribution Games," IZA Discussion Papers 1341, Institute for the Study of Labor (IZA).
  5. Razin, Assaf & Sadka, Efraim, 1991. "International tax competition and gains from tax harmonization," Economics Letters, Elsevier, vol. 37(1), pages 69-76, September.
  6. Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002. "Do Countries Compete Over Corporate Tax Rates?," The Warwick Economics Research Paper Series (TWERPS) 642, University of Warwick, Department of Economics.
  7. Persson, Torsten & Tabellini, Guido, 1995. "Double-edged incentives: Institutions and policy coordination," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 38, pages 1973-2030 Elsevier.
  8. Ernst Fehr & Armin Falk, 2002. "Psychological Foundations of Incentives," CESifo Working Paper Series 714, CESifo Group Munich.
  9. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
  10. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  11. LOPEZ, Salvador & MARCHAND, Maurice & PESTIEAU, Pierre, 1996. "A Simple Two-Country Model of Redistributive Capital Income Taxation," CORE Discussion Papers 1996025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  13. Ernst Fehr & Simon Gaechter, . "Do Incentive Contracts Crowd out Voluntary Cooperation?," IEW - Working Papers 034, Institute for Empirical Research in Economics - University of Zurich.
  14. Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061430, March.
  15. Ernst Fehr & Urs Fischbacher, 2002. "Why Social Preferences Matter -- The Impact of Non-Selfish Motives on Competition, Cooperation and Incentives," Economic Journal, Royal Economic Society, vol. 112(478), pages C1-C33, March.
  16. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, March.
  17. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  18. Carpenter Jeffrey P & Seki Erika, 2005. "Competitive Work Environments and Social Preferences: Field Experimental Evidence from a Japanese Fishing Community," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-25, December.
  19. Mendoza, Enrique G. & Tesar, Linda L., 2005. "Why hasn't tax competition triggered a race to the bottom? Some quantitative lessons from the EU," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 163-204, January.
  20. Manski, Charles F., 2002. "Identification of decision rules in experiments on simple games of proposal and response," European Economic Review, Elsevier, vol. 46(4-5), pages 880-891, May.
  21. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Revil, 2000. "Foreign Direct Investment and the Prospects for Tax Co-Ordination in Europe," Working Papers 2000-06, CEPII research center.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mdl:mdlpap:0603. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vijaya Wunnava)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.