Strive to be first or avoid being last: An experiment on relative performance incentives |
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| Affiliation: | 1. Risk Management Institute, National University of Singapore, 21 Heng Mui Keng Terrace, I3 Building, Singapore 119613, Singapore;2. Department of Economics, National University of Singapore, 10 Kent Ridge Crescent, Singapore 119260, Singapore;1. Department of Economics, Krannert School of Management, Purdue University, 403 W. State St., West Lafayette, IN 47906, USA;2. Department of Food and Nutrition Policy and the Department of Economics, Tufts University, 150 Harrison Avenue, Boston, MA 02111, USA;3. Weatherhead School of Management, Case Western Reserve University, 11119 Bellflower Road, Cleveland, OH 44106, USA;4. Economic Science Institute, Chapman University One University Drive, Orange, CA 92866, USA;1. Christian Doppler Laboratory ”Aging, Health and the Labor Market” at University of Linz (JKU), Austria;2. Department of Economics, University of Munich (LMU), Germany;3. ifo Institute, Munich, Germany;4. Institute for Advanced Studies (IHS), Vienna, Austria;5. Seminar for Population Economics, Department of Economics, Geschwister-Scholl-Platz 1, München D-80539, Germany |
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| Abstract: | We utilize a laboratory experiment to compare effort provision under optimal tournament contracts with different distributions of prizes which motivate agents to compete to be first, avoid being last, or both. We find that the combined tournament contract incorporating both incentives at the top and at the bottom induces the highest effort, especially in larger groups. Avoiding being last produces the lowest variance of effort and is more effective at motivating employees compared to competing for the top. |
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| Keywords: | Tournament Winner Loser Contract Experiment Learning |
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