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

David Gill, Zdenka Kissová (), Jaesun Lee () and Victoria Prowse
Additional contact information
Zdenka Kissová: PricewaterhouseCoopers LLP
Jaesun Lee: Cornell University

No 9286, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

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 (search for similar items in EconPapers)
JEL-codes: C23 C91 J22 M12 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2015-08
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hrm, nep-lma and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published - published in: Management Science, 2019, 65 (2), 494 - 507

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Related works:
Journal Article: First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision (2019)
Working Paper: First-place loving and last-place loathing: How rank in the distribution of performance affects effort provision (2017)
Working Paper: First-place loving and last-place loathing: How rank in the distribution of performance affects effort provision (2016)
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