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First-place loving and last-place loathing: How rank in the distribution of performance affects effort provision

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  • David Gill
  • Zdenka Kissova
  • Jaesun Lee
  • Victoria Prowse

Abstract

Rank-order relative-performance evaluation, in which pay, promotion, symbolic awards and educational achievement depend on the rank of individuals in the distribution of performance, is ubiquitous. Whenever organizations use rank-order relative-performance evaluation, people receive feedback about their rank. Using a real-e?ort experiment, we aim to discover whether people respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit ‘first-place loving’ and ‘last-place loathing’, that is subjects work hardest after being ranked first or last. We discuss implications of our findings for the optimal design of performance feedback policies, workplace organizational structures and incentives schemes.

Suggested Citation

  • David Gill & Zdenka Kissova & Jaesun Lee & Victoria Prowse, 2017. "First-place loving and last-place loathing: How rank in the distribution of performance affects effort provision," Purdue University Economics Working Papers 1295, Purdue University, Department of Economics.
  • Handle: RePEc:pur:prukra:1295
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    More about this item

    Keywords

    Relative performance evaluation; Relative performance feedback; Rank order feedback; Dynamic effort provision; Real effort experiment; Flat wage; Fixed wage; Taste for rank; Status seeking; Social esteem; Self esteem; Public feedback; Private feedback;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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