[go: up one dir, main page]

IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp9286.html
   My bibliography  Save this paper

First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision

Author

Listed:
  • Gill, David

    (Purdue University)

  • Kissová, Zdenka

    (PricewaterhouseCoopers LLP)

  • Lee, Jaesun

    (Cornell University)

  • Prowse, Victoria L.

    (Purdue University)

Abstract
Rank-order relative-performance evaluation, in which pay, promotion and symbolic awards depend on the rank of workers in the distribution of performance, is ubiquitous. Whenever firms use rank-order relative-performance evaluation, workers receive feedback about their rank. Using a real-effort experiment, we aim to discover whether workers respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit 'first-place loving' and 'last-place loathing', that is subjects increase their effort the most after being ranked first or last. We discuss implications of our findings for the optimal design of firms' performance feedback policies, workplace organizational structures and incentives schemes.

Suggested Citation

  • Gill, David & Kissová, Zdenka & Lee, Jaesun & Prowse, Victoria L., 2015. "First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision," IZA Discussion Papers 9286, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9286
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp9286.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ghazala Azmat & Nagore Iriberri, 2010. "The Provision of Relative Performance Feedback Information: An Experimental Analysis of Performance and Happiness," Working Papers 454, Barcelona School of Economics.
    2. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    3. Elsner, Benjamin & Isphording, Ingo, 2015. "Big Fishes in Small Ponds: Ability Rank and Human Capital Investment," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112928, Verein für Socialpolitik / German Economic Association.
    4. repec:bla:jfinan:v:43:y:1988:i:3:p:593-616 is not listed on IDEAS
    5. Johannes Abeler & Armin Falk & Lorenz Goette & David Huffman, 2011. "Reference Points and Effort Provision," American Economic Review, American Economic Association, vol. 101(2), pages 470-492, April.
    6. C. Bram Cadsby & Jim Engle-Warnick & Tony Fang & Fei Song, 2014. "Psychological Incentives, Financial Incentives, and Risk Attitudes in Tournaments: An Artefactual Field Experiment," Working Papers 1403, University of Guelph, Department of Economics and Finance.
    7. Andrew E. Clark & David Masclet & Marie Claire Villeval, 2010. "Effort and Comparison Income: Experimental and Survey Evidence," ILR Review, Cornell University, ILR School, vol. 63(3), pages 407-426, April.
    8. Bellemare, Charles & Lepage, Patrick & Shearer, Bruce, 2010. "Peer pressure, incentives, and gender: An experimental analysis of motivation in the workplace," Labour Economics, Elsevier, vol. 17(1), pages 276-283, January.
    9. Felix Ebeling & Gerlinde Fellner & Johannes Wahlig, 2012. "Peer Pressure in Multi-Dimensional Work Tasks," Working Paper Series in Economics 57, University of Cologne, Department of Economics.
    10. Eriksson, Tor & Poulsen, Anders & Villeval, Marie Claire, 2009. "Feedback and incentives: Experimental evidence," Labour Economics, Elsevier, vol. 16(6), pages 679-688, December.
    11. Richard Murphy & Felix Weinhardt, 2020. "Top of the Class: The Importance of Ordinal Rank," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(6), pages 2777-2826.
    12. Anke Becker & Thomas Deckers & Thomas Dohmen & Armin Falk & Fabian Kosse, 2012. "The Relationship Between Economic Preferences and Psychological Personality Measures," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 453-478, July.
    13. Georganas, Sotiris & Tonin, Mirco & Vlassopoulos, Michael, 2015. "Peer pressure and productivity: The role of observing and being observed," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 223-232.
    14. Armin Falk & Andrea Ichino, 2006. "Clean Evidence on Peer Effects," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 39-58, January.
    15. Ashraf, Nava & Bandiera, Oriana & Lee, Scott S., 2014. "Awards unbundled: Evidence from a natural field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 100(C), pages 44-63.
    16. Jordi Blanes i Vidal & Mareike Nossol, 2011. "Tournaments Without Prizes: Evidence from Personnel Records," Management Science, INFORMS, vol. 57(10), pages 1721-1736, October.
    17. Robert Gibbons & Kevin J. Murphy, 1990. "Relative Performance Evaluation for Chief Executive Officers," ILR Review, Cornell University, ILR School, vol. 43(3), pages 30, April.
    18. Benjamin Elsner & Ingo E. Isphording, 2017. "A Big Fish in a Small Pond: Ability Rank and Human Capital Investment," Journal of Labor Economics, University of Chicago Press, vol. 35(3), pages 787-828.
    19. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2013. "Team Incentives: Evidence From A Firm Level Experiment," Journal of the European Economic Association, European Economic Association, vol. 11(5), pages 1079-1114, October.
    20. David Gill & Victoria Prowse, 2014. "Gender differences and dynamics in competition: The role of luck," Quantitative Economics, Econometric Society, vol. 5, pages 351-376, July.
    21. Erlend E. Bø & Joel Slemrod & Thor O. Thoresen, 2015. "Taxes on the Internet: Deterrence Effects of Public Disclosure," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 36-62, February.
    22. Josse Delfgaauw & Robert Dur & Joeri Sol & Willem Verbeke, 2013. "Tournament Incentives in the Field: Gender Differences in the Workplace," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 305-326.
    23. Haimanti Bhattacharya & Subhasish Dugar, 2012. "Status Incentives and Performance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 33(7-8), pages 549-563, October.
    24. Gary Charness & David Masclet & Marie Claire Villeval, 2014. "The Dark Side of Competition for Status," Management Science, INFORMS, vol. 60(1), pages 38-55, January.
    25. Andrew E. Clark & Nicolai Kristensen & Niels Westergård-Nielsen, 2009. "Economic Satisfaction and Income Rank in Small Neighbourhoods," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 519-527, 04-05.
    26. Michael Kosfeld & Susanne Neckermann, 2011. "Getting More Work for Nothing? Symbolic Awards and Worker Performance," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 86-99, August.
    27. Tore Ellingsen & Magnus Johannesson, 2007. "Paying Respect," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 135-150, Fall.
    28. Uri Gneezy & Aldo Rustichini, 2004. "Gender and Competition at a Young Age," American Economic Review, American Economic Association, vol. 94(2), pages 377-381, May.
    29. David Gill & Victoria Prowse, 2012. "A Structural Analysis of Disappointment Aversion in a Real Effort Competition," American Economic Review, American Economic Association, vol. 102(1), pages 469-503, February.
    30. Baker, G.P. & Jensen, M.C. & Murphy, K.J., 1988. "Compensation And Incentives: Practice Vs. Theory," Papers 88-05, Rochester, Business - Managerial Economics Research Center.
    31. Robert B. Lount & Steffanie L. Wilk, 2014. "Working Harder or Hardly Working? Posting Performance Eliminates Social Loafing and Promotes Social Laboring in Workgroups," Management Science, INFORMS, vol. 60(5), pages 1098-1106, May.
    32. Legge, Stefan & Schmid, Lukas, 2013. "Rankings, Random Successes, and Individual Performance," Economics Working Paper Series 1340, University of St. Gallen, School of Economics and Political Science.
    33. Burrows, Paul & Loomes, Graham, 1994. "The Impact of Fairness on Bargaining Behaviour," Empirical Economics, Springer, vol. 19(2), pages 201-221.
    34. Rosaz, Julie & Slonim, Robert & Villeval, Marie Claire, 2016. "Quitting and peer effects at work," Labour Economics, Elsevier, vol. 39(C), pages 55-67.
    35. Montizaan, Raymond M. & Vendrik, Maarten C.M., 2014. "Misery Loves Company: Exogenous shocks in retirement expectations and social comparison effects on subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 1-26.
    36. Christos Genakos & Mario Pagliero, 2012. "Interim Rank, Risk Taking, and Performance in Dynamic Tournaments," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 782-813.
    37. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    38. Azmat, Ghazala & Iriberri, Nagore, 2010. "The importance of relative performance feedback information: Evidence from a natural experiment using high school students," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 435-452, August.
    39. Sheremeta, Roman M., 2010. "Experimental comparison of multi-stage and one-stage contests," Games and Economic Behavior, Elsevier, vol. 68(2), pages 731-747, March.
    40. Richard B. Freeman & Alexander M. Gelber, 2010. "Prize Structure and Information in Tournaments: Experimental Evidence," American Economic Journal: Applied Economics, American Economic Association, vol. 2(1), pages 149-164, January.
    41. Moers, Frank, 2005. "Discretion and bias in performance evaluation: the impact of diversity and subjectivity," Accounting, Organizations and Society, Elsevier, vol. 30(1), pages 67-80, January.
    42. Gill, David & Stone, Rebecca, 2010. "Fairness and desert in tournaments," Games and Economic Behavior, Elsevier, vol. 69(2), pages 346-364, July.
    43. Dutcher, E. Glenn & Balafoutas, Loukas & Lindner, Florian & Ryvkin, Dmitry & Sutter, Matthias, 2015. "Strive to be first or avoid being last: An experiment on relative performance incentives," Games and Economic Behavior, Elsevier, vol. 94(C), pages 39-56.
    44. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-1324, December.
    45. John DiNardo & Justin L. Tobias, 2001. "Nonparametric Density and Regression Estimation," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 11-28, Fall.
    46. Tor Eriksson & Lei Mao & Marie Claire Villeval, 2017. "Saving face and group identity," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 622-647, September.
    47. Ryan W. Buell & Taly Reich & Michael I. Norton, 2014. ""Last-Place Aversion": Evidence and Redistributive Implications," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 105-149.
    48. Jalava, Nina & Joensen, Juanna Schrøter & Pellas, Elin, 2015. "Grades and rank: Impacts of non-financial incentives on test performance," Journal of Economic Behavior & Organization, Elsevier, vol. 115(C), pages 161-196.
    49. Legge, Stefan & Schmid, Lukas, 2016. "Media attention and betting markets," European Economic Review, Elsevier, vol. 87(C), pages 304-333.
    50. Leonie Gerhards & Neele Siemer, 2014. "Private versus Public Feedback - The Incentive Effects of Symbolic Awards," Economics Working Papers 2014-01, Department of Economics and Business Economics, Aarhus University.
    51. Ben Greiner, 2015. "Subject pool recruitment procedures: organizing experiments with ORSEE," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 1(1), pages 114-125, July.
    52. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    53. Tran, Anh & Zeckhauser, Richard, 2012. "Rank as an inherent incentive: Evidence from a field experiment," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 645-650.
    54. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away From Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(3), pages 1067-1101.
    55. Alexandre Mas & Enrico Moretti, 2009. "Peers at Work," American Economic Review, American Economic Association, vol. 99(1), pages 112-145, March.
    56. Camelia M. Kuhnen & Agnieszka Tymula, 2012. "Feedback, Self-Esteem, and Performance in Organizations," Management Science, INFORMS, vol. 58(1), pages 94-113, January.
    57. Goerg, Sebastian J. & Kube, Sebastian & Radbruch, Jonas, 2017. "The Effectiveness of Incentive Schemes in the Presence of Implicit Effort Costs," IZA Discussion Papers 10546, Institute of Labor Economics (IZA).
    58. Freeman, Richard Barry & Gelber, Alexander M., 2010. "Prize Structure and Information in Tournaments: Experimental Evidence," Scholarly Articles 34310817, Harvard University Department of Economics.
    59. Gary Charness & David Masclet & Marie Claire Villeval, 2014. "The Dark Side of Competition for Status (preprint)," Working Papers halshs-01090241, HAL.
    60. Chaim Fershtman & Uri Gneezy, 2011. "The Tradeoff Between Performance And Quitting In High Power Tournaments," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 318-336, April.
    61. Bentley Coffey & M. T. Maloney, 2010. "The Thrill of Victory: Measuring the Incentive to Win," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 87-112, January.
    62. Ghazala Azmat & Nagore Iriberri, 2016. "The Provision of Relative Performance Feedback: An Analysis of Performance and Satisfaction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(1), pages 77-110, March.
    63. Carol Propper & Deborah Wilson, 2003. "The Use and Usefulness of Performance Measures in the Public Sector," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(2), pages 250-267, Summer.
    64. Aldo Rustichini, 2008. "Dominance and Competition," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 647-656, 04-05.
    65. Dohmen, Thomas & Falk, Armin & Fliessbach, Klaus & Sunde, Uwe & Weber, Bernd, 2011. "Relative versus absolute income, joy of winning, and gender: Brain imaging evidence," Journal of Public Economics, Elsevier, vol. 95(3-4), pages 279-285, April.
    66. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
    67. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2013. "Team incentives: evidence from a firm level," LSE Research Online Documents on Economics 53141, London School of Economics and Political Science, LSE Library.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gwen-Jiro Clochard & Guillaume Hollard & Julia Wirtz, 2022. "More effort or better technologies? On the effect of relative performance feedback," Bristol Economics Discussion Papers 22/767, School of Economics, University of Bristol, UK.
    2. C. Bram Cadsby & Jim Engle-Warnick & Tony Fang & Fei Song, 2014. "Psychological Incentives, Financial Incentives, and Risk Attitudes in Tournaments: An Artefactual Field Experiment," Working Papers 1403, University of Guelph, Department of Economics and Finance.
    3. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    4. Simone Haeckl & Rupert Sausgruber & Jean-Robert Tyran, 2018. "Work Motivation and Teams," Discussion Papers 18-08, University of Copenhagen. Department of Economics.
    5. Gjedrem, William Gilje, 2018. "Relative performance feedback: Effective or dismaying?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 74(C), pages 1-16.
    6. Gary Charness & David Masclet & Marie Claire Villeval, 2014. "The Dark Side of Competition for Status," Management Science, INFORMS, vol. 60(1), pages 38-55, January.
    7. Beugnot, Julie & Fortin, Bernard & Lacroix, Guy & Villeval, Marie Claire, 2019. "Gender and peer effects on performance in social networks," European Economic Review, Elsevier, vol. 113(C), pages 207-224.
    8. Delavallade,Clara Anne, 2021. "Motivating Teams : Private Feedback and Public Recognition at Work," Policy Research Working Paper Series 9621, The World Bank.
    9. Delavallade, Clara, 2021. "Motivating teams: Private feedback and public recognition at work," Journal of Public Economics, Elsevier, vol. 197(C).
    10. Selay Sahan & Euan Phimister, 2022. "Worker Incentives in the Banking Industry," Journal of Financial Services Research, Springer;Western Finance Association, vol. 61(2), pages 259-284, April.
    11. Cadsby, C. Bram & Song, Fei & Engle-Warnick, Jim & Fang, Tony, 2019. "Invoking social comparison to improve performance by ranking employees: The moderating effects of public ranking, rank pay, and individual risk attitude," Journal of Economic Psychology, Elsevier, vol. 72(C), pages 64-79.
    12. Gjedrem, William Gilje & Kvaløy, Ola, 2020. "Relative performance feedback to teams," Labour Economics, Elsevier, vol. 66(C).
    13. Beugnot, Julie & Fortin, Bernard & Lacroix, Guy & Villeval, Marie Claire, 2017. "Gender and Peer Effects in Social Networks," IZA Discussion Papers 10588, Institute of Labor Economics (IZA).
    14. Brade, Raphael & Himmler, Oliver & Jäckle, Robert, 2022. "Relative performance feedback and the effects of being above average — field experiment and replication," Economics of Education Review, Elsevier, vol. 89(C).
    15. Gary Charness & David Masclet & Marie Claire Villeval, 2014. "The Dark Side of Competition for Status (preprint)," Working Papers halshs-01090241, HAL.
    16. Christiane Bradler & Robert Dur & Susanne Neckermann & Arjan Non, 2013. "Employee Recognition and Performance: A Field Experiment," Tinbergen Institute Discussion Papers 13-038/VII, Tinbergen Institute.
    17. Simon Piest & Philipp Schreck, 2021. "Contests and unethical behavior in organizations: a review and synthesis of the empirical literature," Management Review Quarterly, Springer, vol. 71(4), pages 679-721, October.
    18. Fischer, Mira & Wagner, Valentin, 2018. "Effects of Timing and Reference Frame of Feedback: Evidence from a Field Experiment," IZA Discussion Papers 11970, Institute of Labor Economics (IZA).
    19. Leonie Gerhards & Neele Siemer, 2016. "The Impact Of Private And Public Feedback On Worker Performance—Evidence From The Lab," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1188-1201, April.
    20. Murphy, Richard & Weinhardt, Felix, 2020. "Top of the Class: The Importance of Ordinal Rank," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 87(6), pages 2777-2826.

    More about this item

    Keywords

    taste for rank; fixed wage; flat wage; real effort experiment; dynamic effort provision; rank order feedback; relative performance feedback; relative performance evaluation; status seeking; social esteem; self esteem; public feedback; private feedback;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp9286. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.