Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment

Josse Delfgaauw, Robert Dur, Arjan Non and Willem Verbeke
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Willem Verbeke: Erasmus University Rotterdam

No 10-124/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We conduct a field experiment among 189 stores of a retail chain to study dynamic incentive effects of relative performance pay. Employees in the randomly selected treatment stores could win a bonus by outperforming three comparable stores from the control group over the course of four weeks. Treatment stores received weekly feedback on relative performance. Control stores were kept unaware of their involvement, so that their performance generates exogenous variation in the relative performance of the treatment stores. As predicted by theory, treatment stores that lag far behind do not respond to the incentives, while the responsiveness of treatment stores close to winning a bonus increases in relative performance. On average, the introduction of the relative performance pay scheme does not lead to higher performance.

This discussion paper has led to a publication in Labour Economics , 2014, 28 (1-13).

Keywords: Dynamic incentives; Relative performance pay; Field experiment (search for similar items in EconPapers)
JEL-codes: C93 M52 (search for similar items in EconPapers)
Date: 2010-12-09, Revised 2011-09-27
References: View references in EconPapers View complete reference list from CitEc
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https://papers.tinbergen.nl/10124.pdf (application/pdf)

Related works:
Journal Article: Dynamic incentive effects of relative performance pay: A field experiment (2014)
Working Paper: Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20100124

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