Competition and Incentives

Klaus Schmidt (), Lisa Fey and Carmen Thoma
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Lisa Fey: University of Munich
Carmen Thoma: University of Munich

No 31, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: We report on two experiments that identify non-monetary incentive effects of competition. As the number of competitors increases, monetary incentives to engage in cost reduction tend to decrease. We test the hypothesis that there are non-monetary incentive effects of competition going in the opposite direction. In the experiments we change the number of competitors exogenously keeping the monetary incentives to spend effort constant. The first experiment shows that subjects spend significantly more effort in duopolistic and oligopolistic markets than in a monopoly. The second experiment focuses on social comparisons as one potential mechanism for this effect. It shows that competition turns the effort decisions of competing managers into strategic complements.

Keywords: incentive effects of competition; behavioral industrial organization (search for similar items in EconPapers)
JEL-codes: D03 L10 O31 (search for similar items in EconPapers)
Date: 2017-04-28
New Economics Papers: this item is included in nep-com, nep-exp and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Competition and incentives (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:31

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