Equity and Efficiency in Multi-Worker Firms: Insights from Experimental Economics In this paper, we discuss recent evidence from economic experiments that study the impact of social preferences on workplace behavior. We focus on situations in which a single employer interacts with multiple employees. Traditionally, equity and efficiency have been seen as opposing aims in such work environments:...

Performance Appraisals and the Impact of Forced Distribution: An Experimental Investigation A real effort experiment is investigated in which supervisors have to rate the performance of individual workers who in turn receive a bonus payment based on these ratings. We compare a baseline treatment in which supervisors were not restricted in their rating behavior to a forced distribution system in...

Conventional wisdom suggests that an increase in monetary incentives should induce agents to exert higher effort. In this paper, however, we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive reversal might occur: an increase in monetary incentives (either because rewards increase or effort cost...

Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical test developed by Courty and Marschke (2008) to detect whether the widely used class of Residual Income based performance measures —such as Economic Value Added (EVA)— is distorted, leading to unintended agent behavior...

Performance pay, at least as usually understand, is no good idea for non-executive directors. They have to supervise and control or in some situations even to fire and replace the executive managers. This means that their performance as supervisors is totally different from the performance of the supervised executive managers and even the company at large. Moreover, they are mostly interested i...

Gender Pay Gaps among Highly Educated Professionals: Compensation Components Do Matter Making use of panel data from a survey of highly educated professionals, gender pay gaps are explored with regard to total compensation as well as to individual compensation components. The results indicate meaningful male-female wage differentials for this quite homogeneous group of people working in one spe...

This paper reports the results from a controlled field experiment designed to investigate the causal effect of public recognition on employee performance. We hired more than 300 employees to work on a three-hour data-entry task. In a random sample of work groups, workers unexpectedly received recognition after two hours of work. We find that recognition increases subsequent performance substant...

We analyze the optimal combination of promotion tournaments and individual performance pay in an employment relationship. An agent’s effort is non-observable and he has private information about his suitability for promotion. Thus, promotion tournaments and individual performance pay need to be combined to serve both incentive and selection purposes. We find that, if it is sufficiently importan...

ABSTRACT I examine inspector-auditor interactions and test proposed changes to the existing inspection process using a stylized experiment with real-effort repeated interactions. first show that when holding incentives constant, if inspectors perceive request additional audit work, they escalate their deficiency assessments more work. then increasing discussions before formally assess auditors’...

ABSTRACT We examine how subjectivity in performance measurement and reward systems (PMRS) is used to mitigate incentive contracting risks. Drawing on data from 38 interviews with supervisory subordinate managers four firms, we provide a more comprehensive explanation of the role risk mitigation than evident prior literature. empirical evidence importance firms place use misalignment employee so...