The 'ratchet effect' refers to a situation where a principal uses private information that is revealed by an agent's early actions to the agent's later disadvantage, in a context where binding multi-period contracts are not enforceable. In a simple, context-rich environment, we experimentally...

We investigate the influence of two widespread compensation schemes, individual piece-rates and team incentives, on participants' inclination to lie, by adapting the experimental setup of Fischbacher and Heusi (2008). Lying turns out to be more pronounced under team incentives than under...

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated...

The need for efficient coordination is ubiquitous in organizations and industries. The literature on the determinants of efficient coordination has focused on individual decision-making so far. In reality, however, teams often have to coordinate with other teams. We present an experiment with...

We devise an experiment to explore the effect of different degrees of competition on optimal contracts in a hidden-information context. In our benchmark case, each principal is matched with one agent of unknown type. In our second treatment, a principal can select one of three agents, while in a...

In social dilemmas, leading a team by making heroic efforts may prove costly, especially if the followers are not adequately motivated to make similar sacrifices. Attempting to understand what motivates these seemingly selfless individuals to lead, we report the results of a two-stage public...

When exogenously imposed, rank-order tournaments have incentive properties but their overall efficiency is reduced by a high variance in performance (Bull, Schotter, and Weigelt 1987). However, since the efficiency of performance-related pay is attributable both to its incentive effect and to...

Variable pay not only creates a link between pay and performance but may also help firms in attracting the more productive employees (Lazear 1986, 2000). However, due to lack of natural data, empirical analyses of the relative importance of the selection and incentive effects of pay schemes are...

Although relative performance schemes are pervasive in organizations reliable empirical data on induced sabotage behavior is almost non-existent. We study sabotage in tournaments in a controlled laboratory experiment and are able to confirm one of the key insights from theory: effort and...

We study, how help can be fostered under relative rewards by means of team bonus and corporate value statements. A simple model analysis suggests that team members help less as relative rewards increase. As one potential measure to encourage help, we augment relative rewards with team rewards...