Feedback and Incentives: Experimental Evidence

42 Pages Posted: 23 May 2008

See all articles by Tor Eriksson

Tor Eriksson

Aarhus University - Department of Economics

Anders Poulsen

University of East Anglia

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Global Labor Organization (GLO)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2008

Abstract

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated feedback. The pay schemes are a piece rate payment scheme and a winner-takes-all tournament. We find that, regardless of the pay scheme used, feedback does not improve performance. There are no significant peer effects in the piece-rate pay scheme. In contrast, in the tournament scheme we find some evidence of positive peer effects since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off. Moreover, in both pay schemes information feedback reduces the quality of the low performers' work.

Keywords: performance pay, tournament, piece rate, peer effects, information, feedback, evaluation, experiment

JEL Classification: C70, J16, J24, M52, J33, J31, C91

Suggested Citation

Eriksson, Tor and Poulsen, Anders and Villeval, Marie Claire, Feedback and Incentives: Experimental Evidence (April 2008). IZA Working Paper No. 3440, Available at SSRN: https://ssrn.com/abstract=1136245 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Tor Eriksson (Contact Author)

Aarhus University - Department of Economics ( email )

Fuglesangs Allé 4
Aarhus, 8210
Denmark
45 87164978 (Phone)

Anders Poulsen

University of East Anglia ( email )

Norwich NR47TJ, Norfolk
United Kingdom
+44 0 1603 591066 (Phone)

HOME PAGE: http://www.uea.ac.uk/eco/ecopeople/PoulsenA.html

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS ( email )

93, chemin des Mouilles
Ecully, 69130
France
+33 472 86 60 79 (Phone)
+33 472 86 60 90 (Fax)

HOME PAGE: http://www.gate.cnrs.fr/equipe/perso/villeval/villeval.html

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Global Labor Organization (GLO) ( email )

Collogne
Germany

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