Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126655
Authors: 
Cadsby, Bram
Engle-Warnick, Jim
Fang, Tony
Song, Fei
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 9565
Abstract: 
Tournaments are widely used to assign bonuses and determine promotions because of the link between relative performance and rewards. However, performing relatively well (poorly) may also yield psychological benefits (pain). This may also stimulate effort. Through a real-effort artefactual field experiment with factory workers and university students as a comparison group in China, we examine how both psychological and financial incentives, together with attitudes toward risk, may influence motivation and performance. We provided performance-ranking information both privately and publicly, with and without rank-based financial incentives. Our results show that performance-ranking information had a significant motivational effect on average performance for students, but not for that of workers. Adding financial incentives based on rank provided little evidence of further improvement. Much of the difference between workers and students can be explained by differences in attitudes toward risk. Indeed, for both groups financial and psychological incentive effects are both inversely related to individual levels of risk aversion, and are positive and significant both for workers and for students who are sufficiently risk-tolerant.
Subjects: 
tournament
peer pressure
performance feedback
social comparison
incentives
risk aversion
artefactual field experiment
JEL: 
J30
J24
J33
C93
C91
Document Type: 
Working Paper

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