We study worker and firm behavior in an environment where worker effort could depend on co-workers? wages. Theoretically, we show that an increase in workers? ?concerns? with coworkers? wages should lead profit-maximizing firms to compress wages under quite general conditions. However, firms...

Recent studies report that productivity increases under tournament reward structures than under piece rate reward structures. We conduct maze-solving experiments under both reward structures and reveal that overconfidence is a significant factor in increasing productivity. Specifically, subjects...

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...

Tournament incentive schemes offer payments dependent on relative performance and thereby are intended to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to destroy the production of his competitors in order to improve the own relative position....

In a contest players compete for winning a prize by effort and thereby increasing their probability of winning. Contestants, however, could also improve their own relative position by harming the other players. We experimentally analyze contests with heterogeneous agents who may individually...

After a merger, company officials face the challenge of making compensation schemes uniform and of redesigning teams with managers from companies with different incentives, work habits and recruiting methods. In this paper, we investigate the relationship between executive pay and performance...

Standard economic theory asserts that cash incentives are always better than non-cash ones, or at least not worse. This study employs a real effort experiment to analyze the impact of monetary, non-monetary, and a combination of monetary and non-monetary incentives on performance, where...

This paper investigates the implications of different prize structures on effort provision in dynamic (two-stage) elimination contests. Theoretical results show that, for risk-neutral participants, a structure with a single prize for the winner of the contest maximizes total effort, while a...

We study the effects of communication in an experimental tournament between teams. When teams, rather than individuals, compete for a prize there is a need for intra-team coordination in order to win the inter-team competition. Introducing communication in such situations may have ambiguous...

Incentive schemes not only influence the effort provision of workers, but might also induce sorting. As drivers of self-selection, the literature mainly focuses on measures of productivity; however, other variables, such as preferences, beliefs and personality, also play a role. With this paper,...