Sabotage in Tournaments: Evidence from a Laboratory Experiment

Although relative performance schemes are pervasive in organizations reliable empirical data on induced sabotage behavior is almost non-existent. We study sabotage in tournaments in a controlled laboratory experiment and are able to confirm one of the key insights from theory: effort and sabotage increase with the wage spread. Additionally, we find that even in the presence of tournament incentives, agents react reciprocally to higher wages, which mitigates the sabotage problem. Destructive activities are reduced by explicitly calling them by their name 'sabotage'. Communication among principal and agents curbs sabotage due to agreements on flat prize structures and increased output.sabotage, tournament, reciprocity, relative performance scheme, experiment

Feedback in Tournaments under Commitment Problems: The-ory and Experimental Evidence

In this paper, we analyze a principal's optimal feedback policy in tournaments. We close a gap in the literature by assuming the principal to be unable to commit to a certain policy at the beginning of the tournament. Our analysis shows that in equilibrium the principal reveals in-termediate information regarding the agents’ previous performances if these performances are not too different. Moreover, we investigate a situation where the principal is not able to credi-bly communicate her information. Having presented our formal analysis, we test these results using data from laboratory experiments. The experimental findings provide some support for the model

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 which they had to assign differentiated grades. We find that productivity was significantly higher under a forced distribution by about 8%. But also in the absence of forced distribution, deliberate differentiation positively affected output in subsequent work periods.performance measurement, forced distribution, motivation, experiment

Sabotage in Asymmetric Contests – An Experimental Analysis

In a contest players compete for winning a prize by effort and thereby increasing their probability of winning. Contestants, however, could also improve their own relative position by harming the other players. We experimentally analyze contests with heterogeneous agents who may individually sabotage each other. Our results suggest that sabotaging behavior systematically varies with the composition of different types of agents in a contest. Moreover, if the saboteur's identity is revealed sabotage decreases while retaliation motives prevail.Contest, Experiments, Sabotage, Tournament

Experimental Economics in Virtual Reality

Experimental economics uses controlled and incentivized lab and field experiments to learn about economic behavior. By means of three examples, we illustrate how experiments conducted in immersive virtual environments can benefit (experimental) economic research

On the Effect of Incentive Schemes on Trust and Trustworthiness

We experimentally analyze whether being exposed to different incentive schemes induces subjects to change their behavior. In particular, we investigate the effect on trust and trustworthiness measured by conducting an investment game. We implement two simple incentive schemes modeling the basic characteristics of a cooperative incentive environment in which payoffs are based on a group's performance, as well as a competitive environment in which payoffs result from individuals' relative performances. Our results indicate that trust and the expectation of trust are positively affected by being exposed to a team setting compared to a competitive tournament scheme.

On the Effect of Incentive Schemes on Trust and Trustworthiness

We experimentally analyze whether being exposed to different incentive schemes induces subjects to change their behavior. In particular, we investigate the effect on trust and trustworthiness measured by conducting an investment game. We implement two simple incentive schemes modeling the basic characteristics of a cooperative incentive environment in which payoffs are based on a group's performance, as well as a competitive environment in which payoffs result from individuals' relative performances. Our results indicate that trust and the expectation of trust are positively affected by being exposed to a team setting compared to a competitive tournament scheme. (JEL: J 33, D 23, M 52, L 23, C 9

The effect of communication in incentive systems-an experimental study

In organizational theory, it is a widely accepted postulate that cooperation among subjects is enforceable. This assumption is essential for the evaluation of two frequently discussed incentive systems: team and tournament compensation. Whereas in team-based pay systems cooperation is highly desired, cooperation in rank-order tournaments-labeled as 'collusion'-is regarded as one of the main drawbacks of relative performance evaluation. In this experimental study, two different communication technologies are introduced into both incentive environments. The results indicate that when only limited communication is permitted subjects tend to cheat on each other in the tournament rather than in the team setting. Interestingly, allowing subjects to exchange emails leads to a similarly stable cooperation in both incentive systems. Copyright © 2006 John Wiley & Sons, Ltd.