Real-effort Experiment Research Articles

Bad Losers? Bad Winners? The (Adverse) Consequences of Competing Against Peers

Competitive rewards are often assigned on a regular basis, e.g., in annual salary negotiations or employee-of-the-month schemes. In many settings, this implies that the quality of the competitor varies with earlier outcomes. Using a real-effort experiment, we examine how dishonesty and effort evolve in two rounds of competitions in which subjects are matched with different types of competitors in the second round (random/based on first round outcome). We find that (i) first round losers increase cheating in the second round while winners tend to reduce cheating. (ii) Individuals do not anticipate the possibility of a more difficult opponent. In line with expectations, winners increase reported points (sum of effort and cheating) when competing against another winner. This cannot be ascribed to an increase in cheating or effort alone.

Labor Supply, Taxation and the Use of the Tax Revenues. A Real-Effort Experiment in Canada, France, and Germany

Is the labor supply of individuals influenced by their perception of how their income taxes will reflow to them or be wasted in administrative expenditures? We examine this issue experimentally by comparing three different treatments of a real-effort game that vary in the degree of redistribution. At one extreme, the Leviathan scenario, where no tax revenue is redistributed to the taxpayers, is compared to the situation where public expenditures are direct transfer payments. In-between, we investigate a situation where tax revenue is used to finance a public good that provides neither direct nor immediate monetary benefits to the taxpayers. We ran this experiment in three different countries, Canada, France, and Germany, to test whether there may exist any country differences in attitude toward taxation and redistribution. We find that effort is significantly higher in the redistribution treatment than the Leviathan treatment. Tax revenue is the highest in the redistribution treatment, followed by the global public good and the Leviathan treatment. On average, the effort is higher in France than in Canada and Germany.

Motivation and Incentives in an Online Labor Market

In this paper we present results from a large scale real effort experiment in an online labor market investigating the effect of performance pay and two common leadership techniques: Positive expectations and specific goals. We find that positive expectations have a significant negative effect on quantity - and no effect on quality - irrespective of how the workers are paid. On average, workers who receive positive expectations before they start to work, have a five percent lower output than those who do not. Goal-setting has no significant effect, neither on quantity nor quality. Performance pay, in contrast, has a strong positive effect on quantity, although we find no difference between high and low piece rates. Finally, we find no evidence of a multitask problem. Piece rates have no negative effects on the quality of work, even if it is fully possible for the workers to be less accurate and thereby substituting quality for higher quantity.

Affirmative action and retaliation in experimental contests

We conduct a real-effort experiment to test the effects of an affirmative action policy that reserves a share of the prize to subjects of a disadvantaged category in rent-seeking contests. We test three potential pitfalls of the affirmative action policy: (i) whether the introduction of the policy distorts effort and selection in the contest, (ii) whether it leads to reverse discrimination, that is, discourages entry from the advantaged category and (iii) whether the possibility of ex-post retaliatory actions undermines the effectiveness of the policy. We find that the affirmative action contest increases entry of players from the disadvantaged category without affecting entry of advantaged players. This increases overall effort in the contest. However, we find that the possibility of retaliation can undermine the benefits of the affirmative action policy reducing contest participation. This suggests that retaliation is an important aspect to consider when implementing affirmative action policies.

Unequal Incentives and Perceived Fairness in Groups

Incentives shape how much people contribute to the welfare of a group. These incentives do not restrict the opportunities but they change the costs of contributions. This paper studies how the random assignment of such incentives affects perceived distributive justice among group members. Do people consider differences in incentives similar to unequal opportunities, that is, situations in which some people have a lower chance to make a high contribution? The results from a real effort experiment show that the economic framing of incentives matters in this context. If some people do not work for the common good because of rather large private costs, they appreciate these ‘negative incentives’ similarly to unequal opportunities. They do not do so, and become less egalitarian, if lower effort for the group increases the chance for private gains (‘positive incentives’). Interestingly, participants reward group members who do not limit their expected contributions to the group despite adverse incentives.

Work Motivation and Teams

We provide a new measure of work motivation and show that motivation shapes the effects of team incentives and observation by peers on performance. In particular, we measure motivation to work hard as the deviation from the money-maximizing benchmark in a real-effort experiment. While we find that average output increases in response to team incentives and observation, we find that highly motivated workers do not respond. The reason is that highly motivated workers already work hard and increasing effort even further is very costly to them.

The Timing of Discretionary Bonuses: Effort, Signals, and Reciprocity

In a real-effort experiment, we investigate how the timing of discretionary bonuses affects the relationship between workers and managers. Average output is substantially higher if bonuses are paid in the middle rather than upfront or at the end, as workers increase first-period output to signal trustworthiness. In contrast, average output does not differ when the decision is made at the beginning or end. When the decision is made upfront, output increases after receiving a bonus but decreases substantially, if the bonus is not paid. This is consistent with negative reciprocity by workers who anticipate, but do not receive a bonus.

Collaboration and free-riding in team contests

The organization of team contests can enhance productivity if teammates with complementary skills are able to allocate the team’s tasks efficiently, but can also suffer from free-riding incentives. We report the results of a real-effort experiment in which production requires the completion of two complementary tasks, at which workers have heterogeneous skills. We vary whether participants: compete individually; compete in teams where each member must complete each task; or compete in teams where the agents can divide tasks between them and potentially specialize in the task they do best. We report three main results. First, individuals who must work alone divide their work time in a way that is qualitatively consistent with the theoretical predictions, but allocate too little time to their weaker task. Second, there is no difference in productivity or free-riding behavior between individual contests and team contests where teammates cannot specialize. Finally, and most notably, when teammates can divide work tasks, they allocate more time to the tasks they are best at and experience a strong productivity gain. This is true even among teams that cannot communicate – despite the potential for coordination failure or coordination on Pareto dominated equilibria – but the effect is strongest when communication is available.

Costly Voting: A Large-Scale Real Effort Experiment

We test the turnout predictions of the standard two-party, private value, costly voting model through a large-scale, real effort experiment. We do this by recruiting 1,200 participants through Amazon's Mechanical Turk and employing a 2 x 2 between subjects design encompassing small (N=30) and large (N=300) elections, as well as close and one-sided elections. We find partial evidence of selfish instrumental voting. Participants with a higher opportunity cost are less likely to vote (cost effect); turnout rate decreases as the electorate size increases (size effect) in one-sided elections and increases the closer the election is (competition effect) in large elections. Contrary to the theoretical predictions, in large one-sided elections the majority turns out to vote at a higher rate than the minority. We propose an alternative theory assuming that voters obtain a small non-monetary utility if they vote and their party wins.

Affirmative Action and Retaliation in Experimental Contests

We conduct a real-effort experiment to test the effects of an affirmative action policy that reserves a share of the prize to subjects of a disadvantaged category in rent-seeking contests. We test three potential pitfalls of the affirmative action policy: (i) whether the introduction of the policy distorts effort and selection in the contest, (ii) whether it leads to reverse discrimination and (iii) whether the possibility of ex-post retaliatory actions undermines the effectiveness of the policy. We find that the affirmative action contest increases entry of players from the disadvantaged category without affecting entry of advantaged players. However, we find that the possibility of retaliation can undermine the benefits of the affirmative action policy reducing contest participation. This suggests that retaliation is an important aspect to consider when implementing affirmative action policies.

Do Discriminatory Pay Regimes Unleash Antisocial Behavior?

In this paper, we analyze how pay-regime procedures affect antisocial behavior at the workplace. In a real-effort experiment we vary two determinants of pay regimes: discrimination and justification of payments by performance. In our Discrimination treatment half of the workforce is randomly selected and promoted and participate in a tournament (high-income workers) whereas the other half receives no payment (low-income workers). Afterwards, antisocial behavior is measured by a Joy-of-Destruction game where participants can destroy canteen vouchers. The data show that low-income workers destroy significantly more vouchers than high-income workers. Destruction behavior is driven by workers who receive payments that are not justified by performance. When all payments are justified, that is in our Competition treatment where all workers participate in a tournament, the difference vanishes. By using a treatment with random payments, we show that unjustifiably-paid workers destroy less when they had equal opportunities to receive a high payment, i.e., when they were not discriminated by the pay regime.

What Motivates Effort? Evidence and Expert Forecasts

How much do different monetary and non-monetary motivators induce costly effort? Does the effectiveness line up with the expectations of researchers and with results in the literature? We conduct a large-scale real-effort experiment with eighteen treatment arms. We examine the effect of (1) standard incentives; (2) behavioural factors like social preferences and reference dependence; and (3) non-monetary inducements from psychology. We find that (1) monetary incentives work largely as expected, including a very low piece rate treatment which does not crowd out effort; (2) the evidence is partly consistent with standard behavioural models, including warm glow, though we do not find evidence of probability weighting; (3) the psychological motivators are effective, but less so than incentives. We then compare the results to forecasts by 208 academic experts. On average, the experts anticipate several key features, like the effectiveness of psychological motivators. A sizeable share of experts, however, expects crowd-out, probability weighting, and pure altruism, counterfactually. As a further comparison, we present a meta-analysis of similar treatments in the literature. Overall, predictions based on the literature are correlated with, but underperform, the expert forecasts.

The Non‐Equivalence of Labour Market Taxes: A Real‐Effort Experiment

Under full rationality, a labour market tax levied on employers and a corresponding income tax levied on employees are equivalent. With boundedly rational agents, this equivalence is no longer obvious. In a real-effort experiment, we study the effects of these taxes on preferences concerning the size of the public sector, subjective well-being, labour supply and on-the-job performance. Our findings suggest that employer-side taxes induce preferences for a larger public sector. Subjective well-being is higher under employer-side taxes while labour supply is lower, at least at the extensive margin. We discuss three mechanisms that may underlie these results.

Wage Increases and the Dynamics of Reciprocity

We investigate how workers’ performance is affected by the timing of wages in a real-effort experiment. In all treatments, agents earn the same wage sum, but wage increases are distributed differently over time. We find that agents work harder under increasing wage profiles if they do not know these profiles in advance. A profile that continuously increases wages by small amounts raises performance by about 15% relative to a constant wage. The effort reactions can be organized by a model in which agents reciprocally respond to wage impulses, comparing wages to an adaptive reference standard determined by the previous wage.

Physicians’ responses to financial and social incentives: A medically framed real effort experiment

Because compensation policies have critical implications for the provision of health care, and evidence of their effects is limited and difficult to study in the real world, laboratory experiments may be a valuable methodology to study the behavioural responses of health care providers. With this experiment undertaken in 2013, we add to this new literature by designing a new medically framed real effort task to test the effects of different remuneration schemes in a multi-tasking context. We assess the impact of different incentives on the quantity (productivity) and quality of outputs of 132 participants. We also test whether the existence of benefits to patients influences effort. The results show that salary yields the lowest quantity of output, and fee-for-service the highest. By contrast, we find that the highest quality is achieved when participants are paid by salary, followed by capitation. We also find a lot of heterogeneity in behaviour, with intrinsically motivated individuals hardly sensitive to financial incentives. Finally, we find that when work quality benefits patients directly, subjects improve the quality of their output, while maintaining the same levels of productivity. This paper adds to a nascent literature by providing a new approach to studying remuneration schemes and modelling the medical decision making environment in the lab.

The Limits of Expectations-Based Reference Dependence

Theories of expectations-based reference-dependent preferences have provided a critical modeling innovation, incorporating a structured theory of the formation of reference points. An important prediction of these models is a monotone response in behavior to changes in expectations. To test such models we conduct a real-effort experiment manipulating expectations and examining consequences on effort provision. In contrast to the theory, we document substantial nonmonotonicities in the effort response to changing expectations. Our results provide some evidence on the limitations of expectations-based reference dependence. (JEL: D81, D84, D12, D03)

Unethical Behavior and Group Identity in Contests

Using a real-effort experiment, we study whether group identity affects unethical behavior in a contest game. We vary whether minimal group identity is induced or not, whether individuals have to report their own outcome or the outcome of their competitor, and whether pairs of competitors share the same group identity or not. We show that individuals misreport in the same proportion and to the same extent by inflating their outcome or by decreasing their opponent’s outcome, except when any possible scrutiny by the experimenter is removed. Regardless of the possibility of scrutiny by the experimenter, misreporting is affected neither by the competitor’s group identity nor by the individual’s beliefs about others’ misreporting behavior. This suggests that in competitive settings, unethical behavior is mainly driven by an unconditional desire to win.

Unethical Behavior and Group Identity in Contests

Using a real-effort experiment, we study whether group identity affects unethical behavior in a contest game. We vary whether minimal group identity is induced or not, whether individuals have to report their own outcome or the outcome of their competitor, and whether pairs of competitors share the same group identity or not. We show that individuals misreport in the same proportion and to the same extent by inflating their outcome or by decreasing their opponent’s outcome, except when any possible scrutiny by the experimenter is removed. Regardless of the possibility of scrutiny by the experimenter, misreporting is affected neither by the competitor’s group identity nor by the individual’s beliefs about others’ misreporting behavior. This suggests that in competitive settings, unethical behavior is mainly driven by an unconditional desire to win.

Who is attracted by teamwork? Evidence of multidimensional sorting from a real-effort experiment

We analyze the factors that drive an individual’s self-selection decision between (1) working individually and being paid for individual performance and (2) working on a team and being paid for team performance. While the literature has focused on task-specific ability as a self-selection criterion, we also investigate the effects of teamwork skills, expectations concerning the task-specific ability and teamwork skills of potential teammates, and task type. Thus we account for multidimensional sorting. Considering these additional factors might explain the empirical puzzle that some studies have found a positive relation between an individual’s task-specific skills and the propensity to join a team, and others found a negative relation. Confronting our predictions with data from a real-effort pen-and-paper experiment, we find that the less able are attracted by teamwork and team incentives, but teamwork skills and expectations concerning the ability of potential teammates might in fact compensate for this adverse self-selection effect. Regarding task type, we find that teamwork is more attractive if the task offers a high potential for complementarities between team members.

Gift exchange, control, and cyberloafing: A real-effort experiment

Cyberloafing – non-work related internet use – is a prominent problem in modern firms. While incomplete contracts typically rule out direct control of workers’ effort, many employers hope to increase productivity through ‘soft’ control, by restricting the private use of internet at work. In a lab experiment with real effort, we investigate how the temptation of the internet and a manager's decision whether to restrict workers’ access to it affect the morale of workers. When tempted by internet access, workers reciprocate fair wages less than without access. Nevertheless, a manager's decision to actively grant internet access might increase workers’ effort: we find that highly reciprocal workers perceive the autonomy such a policy gives as a gift which they reciprocate with high effort despite the temptation of the internet. For less reciprocal workers the temptation aspect dominates and restricting internet access is better for the manager.