The Effects of Real-Time Feedback on Effort and Performance: Evidence from a Natural Quasi-Experiment

Abstract

New digital technologies allow companies to provide managers with performance feedback in real-time. We provide evidence on the causal effects of such real-time feedback on individual effort and the quality of initial (pre-feedback) and final (post-feedback) decisions by exploiting a natural quasi-experiment in the setting of professional soccer referees. Our results suggest that experienced agents decrease their effort under real-time feedback without harming the quality of their initial decisions. This results in better final decisions because real-time feedback allows agents to correct wrong initial decisions upon feedback. In contrast, less experienced agents increase their effort, but make worse initial decisions. Upon feedback, they manage to compensate for their increased number of wrong initial decisions, but see no improvement in the quality of final decisions. Furthermore, we document that the effects of real-time feedback change over time as agents gain more experience under this system.