The Flipside of Comparative Payment Schemes

Abstract

Comparative payment schemes and tournament-style promotion mechanisms are pervasive in the workplace. We test experimentally whether they have a negative impact on people’s willingness to cooperate. Participants first perform in a simple task and then participate in a public goods game. The payment scheme for the task varies across treatment groups. Compared with a piece-rate scheme, individuals in a winner-takes-all competition are significantly less cooperative in the public goods game. A lottery treatment, where the winner is decided by luck, has the same effect. In a competition treatment with feedback, winners cooperate as little as participants in the other treatments, whereas losers cooperate even less. All three treatments lead to substantial losses in the realised social surplus from the public good while having no significant impact on performance. In a complementary experiment, we aim to shed light on the psychological mechanisms behind our results. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2257 . This paper was accepted by Teck-Hua Ho, behavioral economics.

Competition and Prosociality: A Field Experiment in Ghana

“…This is in line with prior findings (e.g. Buser and Dreber, 2015). The effect seems to be mainly driven by those who (1) win the competition (comparable to Schurr and Ritov, 2016;Gee et al, 2016), (2) are more inequality averse, (3) usually work in teams, and (4) are unaware of the existing bonus system.…”

“…For example, consistent with Buser and Dreber (2015), we expect the coefficient β C to be negative indicating a larger decrease in prosociality in the competitive relative to the non-competitive (threshold) payment scheme. We also expect the decrease in prosociality to be more pronounced in the high-dispersion treatments (where winners earn 15 and losers earn 5) than in the lowdispersion treatments (where they earn 12 and 8 respectively).…”

“…Second, some papers have examined whether exposure to competition or awareness of it could crowd out ex-post prosociality by increasing dishonesty, destructive behavior and individualism, or by affecting moral judgment (e.g. Chen, 2011;Buser and Dreber, 2015;Schurr and Ritov, 2016;Jauernig et al, 2016).…”

The Impact of Losing in a Competition on the Willingness to Seek Further Challenges

“…Also, the choice of performance target is a purely individual choice which does not affect anyone else's payoff. An impact of the competition outcome on altruism (Buser and Dreber, 2013;Chen, 2010) should therefore not influence the results.…”

“…Apicella, Dreber, and Möllerström (2014), on the other hand, find no effect of the outcome of a rock-paper-scissors competition on subsequent willingness to take risk. In two papers looking into the effect of competition on social preferences, Chen (2010) finds that relative to losers, winners are more likely to donate 10 cents to charity and Buser and Dreber (2013) find that, relative to losers, winners are slightly more generous in a subsequent public good game played with a separate set of people.…”