Feedback and incentives: Experimental evidence

Tor Eriksson, Anders Poulsen, Marie Claire Villeval

Research output: Contribution to journalArticlepeer-review

116 Citations (Scopus)

Abstract

This paper experimentally investigates the impact of different pay schemes and relative performance feedback policies on employee effort. We explore three feedback rules: no feedback on relative performance, feedback given halfway through the production period, and continuously updated feedback. We use two pay schemes, a piece rate and a tournament. We find that overall feedback does not improve performance. In contrast to the piece-rate pay scheme there is some evidence of positive peer effects in tournaments since the underdogs almost never quit the competition even when lagging significantly behind, and front runners do not slack off. But in both pay schemes relative performance feedback reduces the quality of the low performers' work; we refer to this as a “negative quality peer effect”.
Original languageEnglish
Pages (from-to)679-688
Number of pages10
JournalLabour Economics
Volume16
Issue number6
DOIs
Publication statusPublished - 2009

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