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Feedback, Incentives and Peer Effects: Experimental Evidence

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  • Tor Viking Eriksson
  • Anders Poulsen, University of East Anglia, United Kingdom
  • Marie Claire Villeval, GATE, University of Lyon II, France
  • Department of Economics
  • Center for Corporate Performance (CCP)

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback, feedback given halfway through the production period, and continuously updated feedback about relative performance. The pay schemes are a piece rate payment scheme and a winner takes-all tournament. We find that the principal should not provide any information on relative  performance, regardless of the pay scheme used, since feedback does not improve performance. Indeed, we do not find evidence of positive peer effects in the piece-rate pay scheme. In both pay schemes, interim feedback generates negative quality peer effects on the less able performers. We find however evidence of positive peer effects in the tournament scheme since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off.

Original languageEnglish
Publication year2008
Publication statusPublished - 2008
EventEuropean Association of Labour Economists - Amsterdam, Netherlands
Duration: 18 Sep 200820 Sep 2008
Conference number: 20


ConferenceEuropean Association of Labour Economists

    Research areas

  • Performance pay, Peer effects, Feedback

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