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Gill, David
Kissová, Zdenka
Lee, Jaesun
Prowse, Victoria L.
Year of Publication: 
Series/Report no.: 
IZA Discussion Papers 9286
Rank-order relative-performance evaluation, in which pay, promotion and symbolic awards depend on the rank of workers in the distribution of performance, is ubiquitous. Whenever firms use rank-order relative-performance evaluation, workers receive feedback about their rank. Using a real-effort experiment, we aim to discover whether workers respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit 'first-place loving' and 'last-place loathing', that is subjects increase their effort the most after being ranked first or last. We discuss implications of our findings for the optimal design of firms' performance feedback policies, workplace organizational structures and incentives schemes.
relative performance evaluation
relative performance feedback
rank order feedback
dynamic effort provision
real effort experiment
flat wage
fixed wage
taste for rank
status seeking
social esteem
self esteem
public feedback
private feedback
Document Type: 
Working Paper

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