Performance Pay and Prior Learning—Evidence from a Retail Chain

Kathrin Manthei (), Dirk Sliwka () and Timo Vogelsang ()
Additional contact information
Kathrin Manthei: Rheinische Fachhochschule Cologne, D-41460 Neuss, Germany
Dirk Sliwka: Faculty of Management and Social Sciences at the University of Cologne, D-50923 Köln, Germany
Timo Vogelsang: Frankfurt School of Finance & Management, D-60322 Frankfurt am Main, Germany

Management Science, 2021, vol. 67, issue 11, 6998-7022

Abstract: We report the results of two field experiments in a retail chain and show that the effectiveness of performance pay crucially hinges on prior job experience. Introducing sales-based performance pay first for district managers and later for store managers, we find negligible average treatment effects. From surveys and interviews, we develop a formal model demonstrating that the effect of performance pay decreases with experience and may even vanish in the limit. We provide empirical evidence in line with this hypothesis—for instance, finding positive treatment effects (only) in stores with low job experience.

Keywords: performance pay; incentives; learning; experience; insider econometrics; field experiment; randomized control trial (RCT) (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2020.3825 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:11:p:6998-7022

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().