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

39 Pages Posted: 22 Sep 2015

See all articles by Glenn Dutcher

Glenn Dutcher

Ohio University; Ohio University

Loukas Balafoutas

University of Innsbruck

Florian Lindner

Max Planck Institute for Research on Collective Goods

Dmitry Ryvkin

Florida State University

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

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.

Keywords: tournament, winner, loser, contract, experiment, learning

JEL Classification: M52, J33, J24, D24, C90

Suggested Citation

Dutcher, Glenn and Balafoutas, Loukas and Lindner, Florian and Ryvkin, Dmitry and Sutter, Matthias, Strive to Be First or Avoid Being Last: An Experiment on Relative Performance Incentives. IZA Discussion Paper No. 9330. Available at SSRN: https://ssrn.com/abstract=2663760

Glenn Dutcher (Contact Author)

Ohio University ( email )

Athens, OH 45701-2979
United States
7405971261 (Phone)

HOME PAGE: http://sites.google.com/site/glenndutcher

Ohio University ( email )

Bentley-Annex 3rd floor
Athens, OH 6020
United States

Loukas Balafoutas

University of Innsbruck ( email )

Universit├Ątsstra├če 15
Innsbruck, Innsbruck 6020
Austria

Florian Lindner

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

HOME PAGE: http://https://sites.google.com/site/florianlindner85/

Dmitry Ryvkin

Florida State University ( email )

Tallahassee, FL 30306-2180
United States

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

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