Incentives versus Sorting in Tournaments: Evidence from a Field Experiment

A vast body of empirical studies lends support to the incentive effects of rank-order tournaments. Evidence comes from experiments in laboratories and non-experimental studies exploiting sports or firm data. Selection of competitors across tournaments may bias these non-experimental studies, whereas short task duration or lack of distracters may limit the external validity of results obtained in lab experiments or from sports data. To address these concerns we conducted a field experiment where students selected themselves into tournaments with different prizes. Within each tournament the best performing student on the final exam of a standard introductory microeconomics course could win a substantial financial reward. A standard non-experimental analysis exploiting across tournament variation in reward size and competitiveness confirms earlier findings. We find however no evidence for effects of tournament participation on study effort and exam results when we exploit our experimental design, indicating that the non-experimental results are completely due to sorting. Treatment only affects attendance of the first workgroup meeting following the announcement of treatment status, suggesting a difference between short-run and long-run decision making.tournaments, incentives, sorting, field experiments

Competition and subsequent risk-taking behaviour: Heterogeneity across gender and outcomes

This paper studies if competition affects subsequent risk-taking behaviour by means of a laboratory experiment that manipulates the degree of competitiveness of the environment under equivalent monetary incentives. We find that competition increases risk aversion, especially for males, but not in a significant manner. When conditioning on the outcome, we find that males become significantly more risk averse after losing the tournament than after randomly earning the same low payoff. In contrast, males do not become more risk-seeking after winning the tournament, while females\u2019 average risk-taking behaviour is unaffected by tournament participation and outcomes. Our findings can be rationalized using the results of the literature on self-serving attribution

Feedback and Incentives: Experimental Evidence

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated feedback. The pay schemes are a piece rate payment scheme and a winner-takes-all tournament. We find that, regardless of the pay scheme used, feedback does not improve performance. There are no significant peer effects in the piece-rate pay scheme. In contrast, in the tournament scheme we find some evidence of positive peer effects since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off. Moreover, in both pay schemes information feedback reduces the quality of the low performers’ work.performance pay, tournament, piece rate, peer effects, information, feedback, evaluation, experiment

Agents’ Performance and Emotions: An Experimental Investigation

This doctoral thesis is structured in three essays. In the first essay (Chapter 2) I explore the behavioural effects of anxiety on agents’ performance. I hypothesize that a certain level of tension and pressure can induce agents to exert more effort, according to theories of anxiety in psychology. The negative valence associated to this emotion might propose an impairment in performance. On the contrary, the laboratory economic experiment I have run shows that when an anxious mood is induced individuals are more likely to exert more effort. Anxiety leads to performance improvements. In the second essay (Chapter 3) I raise a methodological issue on the use of effort tasks in economic experiments. Effort tasks are usually assumed to lead to similar results. However, the choice of the effort task can significantly drive experimental results. I have conducted an economic experiment where I compare four different effort tasks which give a measure of participants’ performance or investment when they compete for a prize. Results show that there is no equivalence between the types of task applied. The last essay (Chapter 4) is a substantial part of a joint project with Professor Daniel J. Zizzo. We ran an experiment where participants are asked to enter a 2-player prize competition. Each pair consists of a High Type participant, who performs a previous real effort task better, and a Low Type participant, who performs a previous real effort task worse. Participants receive feedback on their performance rank and their opponents’ performance rank. They are also informed about the allocation of an extra monetary reward. Participants are then asked to choose their level of investment. They can also sabotage their opponent. Results show that perceived unfairness of the reward allocation rule, expectations of investment and sabotage, and competitive feelings affect participants’ behaviour in the contest

Feedback and Incentives : Experimental Evidence

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated feedback. The pay schemes are a piece rate payment scheme and a winner-takes-all tournament. We find that, regardless of the pay scheme used, feedback does not improve performance. There are no significant peer effects in the piece-rate pay scheme. In contrast, in the tournament scheme we find some evidence of positive peer effects since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off. Moreover, in both pay schemes information feedback reduces the quality of the low performers' work.evaluation ; feedback ; information ; laboratory experiments ; peer effects ; performance pay ; piece rate ; tournament

In Bloom: Gender Differences in Preferences among Adolescents

We look at gender differences among adolescents in Sweden in preferences for altruism, risk and competition. We find that girls are more altruistic and less risk taking than boys. No gender differences are found comparing competitive performance with non-competitive performance in either a verbal or a mathematical task. Boys and girls are also equally likely to self-select into competition in the verbal task, but boys are significantly more likely to choose to compete in math. However, this gender gap diminishes and becomes non-significant when we control for performance beliefs relative to others, indicating that some of the gender gap in our sample is not due to preferences for competition per se.competitiveness; risk preferences; altruism; adolescents; gender differences; experiment

The Effects of Displayed Violence and Game Speed in First-Person Shooters on Physiological Arousal and Aggressive Behavior

Many studies have been conducted to examine the effects of displayed violence in digital games on outcomes like aggressive behavior and physiological arousal. However, they often lack a proper manipulation of the relevant factors and control of confounding variables. In this study, the displayed violence and game speed of a recent first-person shooter game were varied systematically using the technique of modding, so that effects could be explained properly by the respective manipulations. Aggressive behavior was measured with the standardized version of the Competitive Reaction Time Task or CRTT (Ferguson et al., 2008}. Physiological arousal was operationalized with four measurements: galvanic skin response (GSR), heart rate (HR), body movement, force on mouse and keyboard. A total of N = 87 participants played in one of four game conditions (low- vs. high-violence, normal- vs. high speed) while physiological measurements were taken with finger clips, force sensors on input devices (mouse and keyboard), and a Nintendo Wii balance board on the chair they sat on. After play, their aggressive behavior was measured with the CRTT. The results of the study do not support the hypothesis that playing digital games increases aggressive behavior. There were no significant differences in GSR and HR, but with a higher game speed, participants showed less overall body movement, most likely to meet the game’s higher demands on cognitive and motor capacities. Also, higher game speed and displayed violence caused an increase in applied force on mouse and keyboard. Previous experience with digital games did not moderate any of these findings. Moreover, it provides further evidence that the CRTT should only be used in a standardized way as a measurement for aggression, if at all. Using all 7 different published (though not validated) ways to calculate levels of aggression from the raw data, “evidence” was found that playing a violent digital game increases, decreases, or does not change aggression at all. Thus, the present study does extend previous research. Firstly, it shows the methodological advantages of modding in digital game research to accomplish the principles of psychological (laboratory) experiments by manipulating relevant variables and controlling all others. It also demonstrates the test-theoretical problems of the highly diverse use of the CRTT. It provides evidence that for a meaningful interpretation of effects of displayed violence in digital games, there are other game characteristics that should be controlled for since they might have an effect on relevant outcome variables. Further research needs to identify more of those game features, and it should also improve the understanding of the different measures for physiological arousal and their interrelatedness

Competition and well-being: does market competition make people unhappy?

Empirical research on the role of economic institutions for subjective well-being is still widely lacking, while recent economic-experimental outcomes suggest that experienced utility may depend on the intensity of market competition. This paper is the first to empirically analyze the implication of market competition for subjective well-being using real-life survey data on 80,000 individuals in more than 60 countries from the World Values Survey 1997-2001. In support of our hypothesis, we find that market competition aggravates the impact of individual’s bargaining position in economic transactions on her subjective well-being – compared to the least powerful in society. Put differently, we find that market competition enlarges the happiness differences caused by cleavages in socio-economic position. Our results also suggest that competition induced welfare changes are not gender-specific, while a stronger rule of law appears to prevent the generation of such additional benefits or losses. Particularly the latter results call for further economic-experimental corroboration in the laboratory, but also bear important policy implications.Subjective well-being; happiness; utility; competition; rule of law; completeness of contract; laboratory experiment; World Values Survey

Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets

Employers structure pay and employment relationships to mitigate agency problems. A large literature in economics documents how the resolution of these problems shapes personnel policies and labor markets. For the most part, the study of agency in employment relationships relies on highly stylized assumptions regarding human motivation, e.g., that employees seek to earn as much money as possible with minimal effort. In this essay, we explore the consequences of introducing behavioral complexity and realism into models of agency within organizations. Specifically, we assess the insights gained by allowing employees to be guided by such motivations as the desire to compare favorably to others, the aspiration to contribute to intrinsically worthwhile goals, and the inclination to reciprocate generosity or exact retribution for perceived wrongs. More provocatively, from the standpoint of standard economics, we also consider the possibility that people are driven, in ways that may be opaque even to themselves, by the desire to earn social esteem or to shape and reinforce identity.agency, motivation, employment relationships, behavioral economics

Relative Performance Pay in the Shadow of Crisis

We analyze whether incentives from relative performance pay are reduced or enhanced if a department is possibly terminated due to a crisis. Our benchmark model shows that incentives decrease in a severe crisis, but are boosted given a minor crisis since efforts are strategic complements in the former case but strategic substitutes in the latter one. We tested our predictions in a laboratory experiment. The results confirm the effort ranking but show that in a severe crisis individuals deviate from equilibrium significantly stronger than in other situations. This behavior contradicts the benchmark model and leads to a five times higher survival probability of the department. We develop a new theoretical approach that may explain players’ behavior