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An Empirical Investigation of Gaming Responses to Performance Incentives


  • Gerald Marschke
  • Pascal Courty


This paper studies a particular kind of gaming responses to explicit incentives in a large government organization. The gaming responses we consider occur when agents strategically report their performance outcomes to maximize their awards. An important contribution of this work is to examine whether this behavior diverts resources (e.g. agents' time) from productive activities or whether it simply reflects an accounting phenomenon. We evaluate the efficiency impact of the behavior we identify and find that it has a negative impact on the true goal of the organization.

Suggested Citation

  • Gerald Marschke & Pascal Courty, 2000. "An Empirical Investigation of Gaming Responses to Performance Incentives," Discussion Papers 00-12, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:00-12

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    References listed on IDEAS

    1. Paul Oyer, 1998. "Fiscal Year Ends and Nonlinear Incentive Contracts: The Effect on Business Seasonality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 149-185.
    2. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    3. Cragg, Michael, 1997. "Performance Incentives in the Public Sector: Evidence from the Job Training Partnership Act," Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(1), pages 147-168, April.
    4. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April.
    5. Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
    6. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    7. Stacy Dickert-Conlin & Amitabh Chandra, 1999. "Taxes and the Timing of Birth," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 161-177, February.
    8. James J. Heckman & Carolyn Heinrich & Jeffrey Smith, 2002. "The Performance of Performance Standards," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 778-811.
    9. Courty, Pascal & Marschke, Gerald, 1997. "Measuring Government Performance: Lessons from a Federal Job-Training Program," American Economic Review, American Economic Association, vol. 87(2), pages 383-388, May.
    10. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
    11. James J. Heckman & Jeffrey A. Smith & Christopher Taber, 1996. "What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program," NBER Working Papers 5535, National Bureau of Economic Research, Inc.
    12. Gerald Marschke, 2000. "Performance Incentives and Bureaucratic Behavior: Evidence from a Federal Bureaucracy," Discussion Papers 00-09, University at Albany, SUNY, Department of Economics.
    13. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
    14. Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January.
    15. Brown, Keith C & Harlow, W V & Starks, Laura T, 1996. " Of Tournaments and Temptations: An Analysis of Managerial Incentives in the Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 51(1), pages 85-110, March.
    16. Healy, Paul M., 1985. "The effect of bonus schemes on accounting decisions," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 85-107, April.
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    Cited by:

    1. Carolyn J. Heinrich & Gerald Marschke, 2010. "Incentives and their dynamics in public sector performance management systems," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(1), pages 183-208.
    2. Bloom, Nicholas & Van Reenen, John, 2011. "Human Resource Management and Productivity," Handbook of Labor Economics, Elsevier.
    3. Finn Christensen & James Manley & Louise Laurence, 2010. "The Allocation of Merit Pay in Academia," Working Papers 2010-13, Towson University, Department of Economics, revised Jul 2010.
    4. Carolyn Heinrich, 2008. "False or Fitting Recognition? The Use of High Performance Bonuses in Motivating Organizational Achievements," Public administration issues, Higher School of Economics, issue 4, pages 72-104.
    5. Carolyn J. Heinrich & Laurence E. Lynn Jr., 1999. "Governance And Performance: The Influence of Program Structure and Management on Job Training Partnership Act (JTPA) Program Outcomes," JCPR Working Papers 107, Northwestern University/University of Chicago Joint Center for Poverty Research.
    6. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2010. "Recent Advances in the Empirics of Organizational Economics," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 105-137, September.
    7. Carolyn J. Heinrich, 2000. "Organizational form and performance: An empirical investigation of nonprofit and for-profit job-training service providers," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(2), pages 233-261.
    8. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," The Centre for Market and Public Organisation 03/071, Department of Economics, University of Bristol, UK.
    9. Pierre Koning & C.J. Heinrich, 2009. "Cream-skimming, parking and other intended and unintended effects of performance-based contracting in social welfare services," CPB Discussion Paper 134, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation


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