Performance Pay and the Erosion of Worker Cooperation: Field Experimental Evidence

25 Pages Posted: 13 Mar 2006

See all articles by Stephen V. Burks

Stephen V. Burks

University of Minnesota, Morris - Division of Social Science; Institute for the Study of Labor (IZA); Center for Decision Research and Experimental Economics (CeDEx); Center for Transportation Studies, University of Minnesota

Jeffrey P. Carpenter

Middlebury College - Department of Economics; IZA Institute of Labor Economics

Lorenz Goette

University of Lausanne; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: March 2006

Abstract

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.

Keywords: field experiment, social preference, altruism, conditional cooperation, egoism

JEL Classification: C72, C78, C93, D23, J33, J54, Z13

Suggested Citation

Burks, Stephen V. and Carpenter, Jeffrey P. and Goette, Lorenz F., Performance Pay and the Erosion of Worker Cooperation: Field Experimental Evidence (March 2006). IZA Discussion Paper No. 2013. Available at SSRN: https://ssrn.com/abstract=890297

Stephen V. Burks

University of Minnesota, Morris - Division of Social Science ( email )

600 East 4th St.
Morris, MN 56267
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320-589-6117 (Fax)

HOME PAGE: http://www.morris.umn.edu/academics/truckingproject/

Institute for the Study of Labor (IZA)

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Center for Decision Research and Experimental Economics (CeDEx) ( email )

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Center for Transportation Studies, University of Minnesota ( email )

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Jeffrey P. Carpenter (Contact Author)

Middlebury College - Department of Economics ( email )

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Middlebury, VT 05753
United States
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802-443-2084 (Fax)

HOME PAGE: http://community.middlebury.edu/~jcarpent/index.ht

IZA Institute of Labor Economics

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Germany

Lorenz F. Goette

University of Lausanne ( email )

Department of Economics
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Switzerland
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

HOME PAGE: http://www.iza.org

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