Relative performance feedback to teams

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Labour Economics

journalhomepage:www.elsevier.com/locate/labeco

Relative performance feedback to teams

William Gilje Gjedrem, Ola Kvaløy

University of Stavanger, UiS Business School, 4036 Stavanger, Norway

a r t i c le i n f o

Keywords:

Teams

Performance feedback Performance pay Experiment

a b s t r a ct

Workteamsoftenreceivefeedbackonhowwelltheirteamisperformingrelativetotheirbenchmarks.Inthis paper,weinvestigateexperimentallyhowteamsrespondtorelativeperformancefeedback(RPF).Wefindthat whensubjectsworkunderteamincentives,thenRPFonteamperformanceincreasestheteams’averageperfor- mancebyalmost10%.Thetreatmenteffectisdrivenbyhighertopperformance,asthisisalmost20%higher whentheteamsreceiveRPFcomparedtowhentheteamsonlyreceiveabsoluteperformancefeedback(APF).

Theexperimentsuggeststhattopperformersareparticularlymotivatedbythecombinationofteamincentives andteamRPF.Wealsofindnotablegenderdifferences.FemalesrespondnegativelytoindividualRPF,buteven morepositivelythanmalestoteamRPF.

1. Introduction

Peoplepreferhighranktolowrank.Evenwhenrankisindependent frommonetaryoutcomes,peoplearewillingtotakecostlyactionsin ordertoclimbtheladder.“….rankamongourequals,is,perhaps,the strongestofallourdesires” wroteAdamSmithin1759.Modernorga- nizationsutilizethisbasichumaninsightbyprovidingemployeeswith feedbackontheir relativeperformanceinorder tomotivatethemto workharder.

However,althoughrankandrelativeperformancefeedback(RPF) is such a basic ingredient in competitive environments, it is only recently that scholarswithin economics have systematically studied how people respond to RPF. The early literature on relative per- formance evaluation studied the effect of connecting rank to mon- etary incentives (see Lazear and Rosen (1981) seminal contribu- tion on rank order tournaments). More recent theories on compet- itive preferences and status concerns (Frank, 1985; Clark and Os- wald, 1996; Auriol and Renault, 2008) suggest, however, that rank per se motivates effort.¹ It has now been demonstrated, through controlled experiments in the lab and in the field, that RPF in- deed affects individual behavior, even when relative performance doesnot affect pay.Forexample, BlanesiVidal andNossol(2011), KuhnenandTymula(2012),Tafkov(2013),Charnessetal.(2014),and

∗Correspondingauthor.

E-mailaddresses:william.g.gjedrem@uis.no(W.G.Gjedrem), ola.kvaloy@uis.no(O.Kvaløy).

1 Whilestatusconcernsmaybeindependentfromcompetitivepreferences,the latterisoftenseenasaconsequenceoftheformer.Peopleliketooutperform othersbecauseitgivessocialstatus(seee.g.,CharnessandGrosskopf,2001).We willusethetwotermssynonymouslyinthispaper,andwillnottrytodisentangle thetwo.

Krameretal.(2016)findperformanceimprovementsinsituationswhere RPF is provided, while Hannan etal.(2008), Hannan et al.(2013), Azmat and Iriberri (2016), and Gjedrem (2018) find significant context specific effects of RPF. There are also studies that do not find any positive effects of RPF. Guryan et al. (2009), Erikssonetal.(2009)andBellemareetal.(2010)findnosignificantef- fects,whileBarankay(2012)findthatremovingRPFpositivelyaffected productivity.

Relativeperformancefeedbackisalsoprovidedtogroupsofindivid- uals,likefirms,orteamswithinfirms,whocompeteagainsteachother andreceivefeedbackabouttheirrelativeperformance.Salesteamsor R&Dteams,forinstance,arebenchmarkedagainstsimilarteamsinother firms.Moreover,firmsoftensetupinternalcompetitionsbetweenteams inordertosellmoreorinnovatemore(Birkinshaw,2001;Marinoand Zábojnik,2004;Baeretal.,2010).Successfulteamsaretypicallycom- pensatedbysomemonetaryrewards,butteamcompetitionspersemay alsobemotivating.Thereareonlyafewstudiesontheeffectsofteam RPFwithreal-efforttask,seee.g.Delfgaauwetal.(2013).² However there isalargerliterature onbehaviorin groupcontestsusingother typesoftasks,seearecentsurveybySheremeta(2018)fordetailson this.

Wecontributetotheexistingliteraturebyinvestigatinghowteams respondtorelativeperformancefeedbackwhileworkingonareal-effort task.Wefirstbuildamodel,consideringhowpeople’sutilityisaffected

2TheystudycompetitionbetweenstoresinaDutchRetailchainandfindthat RPFtostores(i.e.teams)improvessalesevenwhenrankdonotaffectmonetary outcomes.

https://doi.org/10.1016/j.labeco.2020.101865

Received3May2019;Receivedinrevisedform3June2020;Accepted4June2020 Availableonline1July2020

0927-5371/© 2020TheAuthors.PublishedbyElsevierB.V.ThisisanopenaccessarticleundertheCCBYlicense.(http://creativecommons.org/licenses/by/4.0/)

byfeedbackonrankandpeerpressure.Inparticular,peoplemayexpe- rienceutilityfrombeingrankedagainstothers,andfrompeerpressure ofobservingothers’performance.Fromatheoreticalperspective,one maythinkofatleasttworeasonswhypeoplemightresponddifferently toteamfeedbackcomparedtoindividualfeedback.Thefirstrelatesto statusconcernsandcompetitivepreferences:Theutilityfromwinning togetherwithateammightpotentiallybedifferentfromtheutilityof winningalone,sinceonethensharethepleasurewithotherteammem- bers.Similarly,thecostsoflosingasateammightbedifferentfromthe costsoflosingalone,asonecanfindcommonsupportandcomfort.The secondrelatestopeerpressureand"teamspirit".Asdemonstratedtheo- retically(KandelandLazear,1992)andempirically(e.g.,Babcocketal., 2015;Corgnetetal.,2015),peerpressurecanmotivateworkerstoexert effortinteams.Team-basedincentiveschemesmaycreatepeerpressure sincelow(high)efforthasanegative(positive)externalityonpeers’pay.

Ifpeersalsocareaboutteamrank,thenteamRPFmaycreateadditional peerpressurewithintheteam.

WeinvestigateRPFtoteamsbyconductingacontrolledlaboratory experimentconsistingofeighttreatments.Ineachtreatment,subjects workonareal-efforttaskforsixperiods.Weprimarilyvarytreatments alongtwodimensions:teamorindividualincentives,andteamorin- dividualfeedback.However,toestablisha“baseline” ofperformance, wealsohavetreatmentsinwhichsubjectsonlyreceiveabsoluteperfor- mancefeedback.UnderRPF,individuals(teams)arealwayscompared withtwootherindividuals(teams),i.e.aftereachperiod,eachindivid- ualorteamisrankedaseithernumber1,2or3.Eachteamconsistsof threesubjects,soeachsubjectearnsonethirdoftotalteamoutputwhen providedwithteamincentives.Themonetaryoutcomesareindependent fromfeedbackrankings.

WhileourmainobjectiveistoinvestigatetheeffectofteamRPF,our secondaryobjectiveistounderstandwhenandwhyteamRPFhasan effect.Itisdifficulttodisentanglebetweenthetwomainmechanisms thatcouldmakepeopleresponddifferentlytoteamRPFcomparedto individualRPF(statusconcernsandpeerpressure).Ourapproachisto remove(oratleastreduce)peerpressurebylettingpeopleworkonbe- halfofteams,wheretheothersintheteamdonotwork.Wethusalso rantwo“teamleader” treatments,whereworkersactedasteamleaders andworkedonbehalfoftheirteam.

Insum,theseeighttreatmentscanprovideanswerstoourtwomain questions:Howandwhydoindividuals’performancesinteamsrespond torelativeperformancefeedback?ThemainresultsisthatRPFtoteams indeedincreaseperformance,andthatcompetitivepreferences,rather thanpeer pressureor “teamspirit”,seemtodrive theresults.More specifically,our results can be summarized asfollows: Wefind that whensubjectsareexposedtoteamincentives,thenRPFonhowtheir teamisdoingcomparedtotwootherteamsincreasestheteam’saverage performancebyalmost10%.Thetreatmenteffectisdrivenbyhighertop performances.³Thebestperformancewithineachteamisonaverage almost20%higherwhenteamsreceiveteamRPFcompartedtowhen teamsonlyreceiveteamAPF.Theseeffectsmoreorlessdisappearun- derindividualincentivesandindividualRPF.Ourexperimentthussug- geststhatsomesubjectsareparticularlymotivatedbythecombination ofteamincentivesandteamRPF.Thestrongeffectontopperformers, andtheinsignificanteffectonotherteammembers,indicatesthatteam spiritisnotamainexplanationofourresults.Ourresultsfromtheteam leadertreatmentssupportthisconjecture.Wefindthatteamleadersre- ceivingRPFperform significantlybetterthanteamleaderswhoonly receiveabsoluteperformancefeedback,indicatingthatstatusconcerns

3 Weusetheperformanceofsubjectsinthefinalworkstagetocategorize

“topperformance” and“topperformers”,i.e.thebestsubjectwithineachteam inthefinalstageiscategorizedasthe“topperformer” inthatteam,regardlessof howtheyperformedintheotherworkingstages.Hence,theeffectisdrivenby higherperformanceofthemostproductiveindividualinthefinalstagewithin eachteam,whencomparingtreatmentswithandwithoutteamRPF.Weusetop performersorbestperformersinterchangeablythroughoutthisarticle.

orcompetitivepreferencesbetterexplainourresultsthanpeerpressure orteamspirit.

The positive effect of team RPF complements Delfgaauw et al. (2013) who in a field experiment find positive effectsofteamRPFunderweakteamincentives.Incontrasttous,they do not comparewith individualRPF, nordo they study interaction effectsbetweenteamRPFandteamincentives.Ourresultsalsocom- plement vanDijk,Sonnemans, andvanWinden(2001) findingsthat team incentiveslead tohigher topperformances.Inourexperiment, teamRPFisneededinadditiontoteamincentivesinordertoimprove topperformanceandtherebycompensateforthedropinperformance observedwhensimplymovingtoteamincentives.

However, our results contrast with a field study by Bandiera et al. (2013). They find that ranking teams reduces overall performance, as lower ranked teams decreased their pro- ductivity. Our experiment has important differences though, as Bandiera et al. (2013) study this in a within-subject experimental designwithendogenouslyformedteams,whereas weuseabetween- subject design withexogenously formed teams. They arguethat the reductioninproductivityisduetosubjectsstartingtosortintoteams based on ability rather than social ties, which leads to more free- riding in lowproductive teamswith weakersocial ties.⁴ Hence, the reduction in performance in their study is likely tobe drivenby a factornotpresentinourstudy.Moreover,inarecentfieldexperiment by Chen and Gong (2018), it has been shown that teams formed endogenously exerted higher effort thanexogenously formed teams.

Thissupportstheideathatsocialtieswithinanendogenouslyformed teamaffecteffortperse.

Wealsostudygendereffects.Previousliteraturehasshownthatgen- derisanimportantvariableinordertounderstandcompetitiveprefer- ences(foranoverviewseeCrosonandGneezy,2009;Bertrand,2011).

Inparticular,femalestendtoshyawayfromcompetitivesettingsand they aremorerisk aversethanmales (seee.g.,Niederle andVester- lund,2007;CharnessandGneezy,2012).Whenfacedwithacompet- itiveenvironment,malestendtorespondpositively,whilefemalesdo not (Gneezyet al., 2003; GneezyandRustichini, 2004).Azmat and Iriberri(2016)alsofindthatfemalesarelessresponsivetoindividual RPFthanmales.GenderdifferencesinresponsetoteamRPFhavenot beenstudied,butithasbeenfoundthatwomenarelessaversetocom- petitioniftheycompeteasteamsratherthanasindividuals(Healyand Pate,2011;Dargnies,2012;Floryetal.,2015).Moreover,arecentex- perimentbyKuhnandVilleval(2015)showthatwomenaremorelikely thanmentoenterteam-basedenvironments.Ourresultscomplement thisliterature..Indeed,wefindthatfemalesrespondnegativelytoin- dividualRPFalsoin ourstudy,butevenmore positivelythanmales toteamRPF.Formales,teamincentiveshaveastrongnegativeeffect comparedtoindividualincentives,unlessaccompaniedbyteamRPF.

Forfemales,incentivesdonotmattertothesamedegree.TeamRPFhas astrongpositiveeffectregardlessoftheincentivesystem.

Onamore generallevel,ourresults can contributetoexplaining whyteamincentivesaresocommon,despitethewell-knownfree-rider problem.AmajorityoffirmsintheUSandUKreportsomeuseofteam- workinwhichgroupsofemployeessharethesamegoalsorobjectives, andtheincidenceofteamworkandteamincentiveshasbeenincreas- ingovertime(seee.g.,LazearandShaw,2007;Bandieraetal.,2013, andthereferencestherein).Teamincentivesarepuzzlingbecausethe individualincentiveeffectisquitesmall,andthetemptationtofree-ride onpeers’effortishigh(Holmstrom,1982).Empiricalresearchshows, however,thatteamincentivesdosurprisinglywell,andithasbeenhard toactuallyidentifystrongfree-ridereffects.⁵

4ItisarguedbyBandieraetal.(2013)thatsocialtieswithintheteamame- lioratefree-riding.

5A rangeofstudiesemploying differentempiricalapproacheshaveiden- tified mixed effectsof team incentives. Insome field studies, thereis an

Peerpressureandteamspiritisacommonexplanationforwhyteam incentivesworkbetterthanstandardtheorypredicts.⁶AsAlchianand Demsetz(1972)notes“Ifonecouldenhanceacommoninterestinnon- shirkingin theguiseof teamloyalty orteam spirit,theteamwould bemore efficient.Thedifficulty, ofcourse,istocreateeconomically thatteamspiritandloyalty”.Theoristshavealsoinvestigatedmorefor- mallyhowfirms cancreate thekindof teamspiritthat Alchainand Demsetzcallfor.KandelandLazear(1992)introduceapeerpressure functionanddiscusseshowfirmscanmanipulatepeerpressurebye.g.

investinginteamspiritbuildingactivities.AkerlofandKranton(2000, 2005)incorporateidentityintoanotherwisestandardutilityfunction.

Theydiscusshowteamsorfirmscan transformtheworkers’identity from“outsiders” to“insiders” bycreatingcommongoalsthateachindi- vidualshareswiththeirteamorfirm.

Relativeperformancefeedbacktoteamscanbeseenasameansof creatingthekindofteamspiritoridentitydiscussedbythesetheorists.

However,ourresultspointstoadifferentmechanism.Topperformers respondstronglytorelativeperformancefeedbackinourexperiment, whiletheeffectisinsignificantfortheotherteammembers.Moreover, teamleadersrespondevenwhentheirpeersdonothing.Thetheoretical frameworkwe presentindicatethat ourresults aremainlydrivenby statusconcernsand/orcompetitivepreferencesratherthanteamspirit andpeerpressure.

Tothebestofourknowledge,wearethefirsttostudytheeffect ofrelativeperformancefeedbacktoteamsinalaboratoryexperiment usingarealefforttask.However,ourpaperrelatestoalargerlitera- turestudyinghowintergroupcompetitionsorcomparisonsaffectintra groupbehavior.Socialpsychologistshavearguedthatintergroupcom- parisonscan motivategroupmemberstoincreasethecontributionto theirowngroup(Turner,1975).Anumberof experimentshavesup- portedthisconjecture.Groupcompetition caninduce morecoopera- tion(BornsteinandBen-Yossef,1994),lessfree-riding(Bornsteinetal., 1990; Erev et al., 1993; Bornstein andBen-Yossef, 1994), and bet- tercoordination (Bornsteinetal.,2002).Seealsoarecentsurveyby Sheremeta(2018) on behaviorin group contests andthe references therein.Notably,Erevetal.(1993)find,usingafieldexperiment,that prize competition between teamseliminates the free-rider effectsof teamincentives.Wefindasimilarresult,butwiththeimportantdif- ferencethatoursubjectscompetewithoutmonetaryprizes.

Some recent papers find that intergroup comparisons can im- proveintragroupcontributionsevenwithoutmonetaryprizes.Tanand Bolle(2007), Burton-ChellewandWest(2012),andBöhmandRock- enbach(2013)findthatsubjectscontributemoretoapublicgoodif theirgroup’scontributioniscomparedtoanothergroup.⁷Thisclearly

overallperformanceimprovementof teamincentives,relativetoindividual incentivesor relative toanabsence of team incentives,see e.g.Knez and Simester(2001),Hamiltonet al.(2003) andBoning et al.(2007).On the otherhandvanDijketal.(2001),VandegriftandYavas(2011),andChenand Lim(2013),usingcontrolledlaboratoryexperimentstostudyteamincentives, donotfindanyoverallchangeinperformance.vanDijketal.(2001)dofind thatsomesubjectsimprove,butthisisoffsetbyotherswhofree-ride.Stilloth- ersfindanegativeeffectofintroducingteamincentives.NalbantianandSchot- ter(1997)findextensiveshirkingbehaviorunderdifferenttypesofteamincen- tives,butcompetitionbetweenteamsforafixedpriceincreasesperformance significantly.

6 Itshouldbe notedthattherearenotonlyso-calledbehavioralornon- monetaryreasonswhyteamincentivesmightwork.Teamincentivescanex- ploitcomplementaritiesandfostercooperation(HolmströmandMilgrom,1990; Itoh,1991,1992;Macho-StadlerandPérez-Castrillo,1993;Büyükboyacıand Robbett,2017;BüyükboyaciandRobbett,2019).Teamincentivescanalsobe desirableinrepeatedsettings,asitstrengthensimplicitincentives,seeCheand Seung-Weon(2001)andKvaløyandOlsen(2006).However,experimentalin- vestigationofteamincentives,liketheonepresentinthepaper,abstractfrom suchtechnologicalteameffects.

7 SeealsoSausgruber(2009)whodoesnotfindsignificanteffectsfrominter- groupcomparisons.

resembles andsupportsourfindings onteam RPF,buttherearesig- nificantdifferences.Importantly,weconductarealeffortexperiment wheresubjectshavetoworkonaspecifictask,incontrasttothepublic goodsexperiments(PGEs)where“effort” isasimpledecisionvariable.

Moreover, theexperimentscitied above donot studytheinteraction effectsbetweendifferentincentiveregimesanddifferentfeedbacksys- tems,whichisourfocus.

Therestofthepaperisorganizedasfollows.InSection2wepresent ourexperimentaldesign.InSection3wepresentatheoreticalframe- workandprovidesomebehavioralpredictions.InSection4wepresent theresultsfromtheexperiment,whileSection5concludes.

2. Experimentaldesign 2.1. Task

Subjectsworkonareal-efforttaskofdecodingnumbersintoletters, usedinseveralotherrelatedexperiments(e.g.,Charnessetal.,2014).

Specifically,subjectshavealistofletterseachassignedwithacorre- sponding number,andthetaskis todecode givensequencesoffour numbersintotheirrespectiveletter.Theexperimentalsessionconsists ofsixworkingstages,eachlastingfiveminutes.Thereisabreakinbe- tweeneachstage,andduringthebreaksubjectsreceivefeedback(ex- plainedbelow).Participantsearna100NOKshow-upfee($1≈8NOK).

Inaddition,theycanearnmoneybysolvingtasks,explainedinthenext subsection.

Therearetwomainreasonswhywehavechosenthisparticulartask.

First,itrequiresnopriorknowledgeandiseasytounderstand.Second, weexpectthetasktobeboringandtiresome,generatingdisutilityof effort.Toensuredisutilityofeffortweallowsubjectstoengageinal- ternativeactivitiesduringtheexperiment,suchasusingtheirmobile phonesforinternetsurfing.Werequirethemtoremainintheirseatand refrainfromcommunicatingwithotherparticipantsbuttellthemthey canfreelyallocatetheirtimetowhateversuitsthemthemost.Distract- ingactivitiesaretypicallyalsopresentintheworkplaceso,ifanything, theseactivitiesonlymakeitmoresimilartothefield.Thetaskalsopro- videsaprecisemeasureofoutput,whichisourproductivityindicator.

Eachsessionhasthesamesequenceofnumber-decodingtasks.Subjects cannotproceedtoanewtaskbeforethecurrenttaskiscorrectlysolved.

2.2. Treatments

Weprimarilyvarytreatmentsalongtwodimensions:teamorindivid- ualincentives,andteamorindividualfeedback.However,toestablish a“baseline” ofperformance,wehavetwotreatmentsinwhichsubjects onlyreceiveabsoluteperformancefeedback.Feedbackalwaysconcerns performanceinthepreviousstageonly,i.e.noaggregateinformation ofmultiplestagesisdisplayed.Inalltreatments,subjectslearnabout theirindividualabsoluteperformance.Moreover,inallteamtreatments, subjectslearnthetotalabsoluteperformanceoftheirteam.Whensub- jectsreceiveRPF,individuals(teams)arealwaysrankedrelativetotwo otherindividuals(teams),andtheyarerankedrelativetothesameindi- viduals(teams)throughouttheexperiment(randomlyassigned).Team membersworkindependentlyonthetasks,andtherearenocomple- mentaritiesin production.Teamsalsoremain unchangedthroughout theexperiment(randomlyassigned).

Thepiece-rateforacorrectlysolvedtaskis1NOK.Intheindividual incentivetreatments,subjectsearnthepiece-ratemultipliedwithtotal numberoftaskstheysolve.Intheteamincentivetreatments,subjects earnthepiece-ratemultipliedwithonethirdofthetotalnumberoftasks theteamsolved,i.e.allteammembersearnthesame.Hence,monetary outcomesonlydependonthenumberoftaskssubjectsorteamssolve, notonfeedbackranks.

Treatmentnamesarestructuredasfollows:Itfirstdenoteswhether feedbackis absolute(APF) orrelative(RPF), thenwhetherthere are

Table1

Summaryoftreatments.

Treatment Feedback type Compensation scheme Level of feedback Number of subjects

Number of clusters (independent observations) RPF-ind-ind Relative Individual Individual 51 subjects (20 females, 31 males) 17

RPF-ind-team Relative Individual Team 45 subjects (14 females, 31 males) 5 RPF-team-ind Relative Team Individual 63 subjects (27 females, 36 males) 21 RPF-team-team Relative Team Team 54 subjects (27 females, 27 males) 6 APF-ind-ind Absolute Individual Individual 68 subjects (29 females, 39 males) 68 APF-team-team Absolute Team Team 57 subjects (23 females, 34 males) 57 APF-teamleader Absolute Team Individual 93 subjects (50 females, 43 males) 31 RPF-teamleader Relative Team Team 84 subjects (49 females, 35 males) 28

individual(ind)orteam(team)incentives,andfinallywhetherthelevel offeedbackisindividual(ind)orteam(team)based.

Weintroducetreatmentsgradually.Alltreatmentsaresummarized inTable1andthenexplainedbelow.

Westartbykeepingonedimensionfixedandexplaintreatmentsthat containRPFfirst.

IntheRPF-ind-indtreatment,subjectsearnindividualincentivesand receive individual RPF. The individual RPF consists of performance informationabout two other participants in the session. They learn howmanytaskstheyhavesolvedthemselves,andtheirperformanceis ranked(from1to3)andtheyarealsoinformedabouthowmanytasks theothertwosubjectssolved.Inadditiontotheshow-upfee,subjects earnthepiece-ratemultipliedwiththenumberoftaskstheysolve.

InRPF-ind-teamtreatment,subjectsstillearnindividualincentives, butRPFischangedandnowconcerns teamsratherthanindividuals.

Theylearnhowmanytaskstheyhavesolvedthemselves,andtheteam RPFconsistsofperformanceinformationabouttheirownteamandtwo otherteamsin thesession.⁸ Inparticular,theteam’sperformance is ranked(from1to3)andtheylearnhowmanytaskstheothertwoteams solved.Inadditiontotheshow-upfee,subjectsearnthepiece-ratemul- tipliedwiththetotalnumberoftaskstheysolve.

IntheRPF-team-indtreatment,subjectsstillreceiveindividualRPF, butincentivesarechangedandnowconcernteamoutputsratherthan individualoutputs. Theindividual RPFconsistsof individual perfor- manceinformationaboutthemselvesandthetwootherteammembers.⁹ Inparticular,theirperformanceisranked(from1to3)andtheylearn howmanytasksthemselvesandtheothertwosubjectssolved.Inaddi- tiontotheshow-upfee,subjectsearnthepiece-ratemultipliedwithone thirdofthetotalnumberoftaskstheirteamsolves.

IntheRPF-team-teamtreatment,subjectsreceivebothteamRPFand teamincentives,ratherthanindividualRPFandindividualincentives.

Theylearnhowmanytaskstheysolvedthemselves,andtheteamRPF consistofperformanceinformationabouttheirownteamandtwoother teams.Inparticular,theteam’sperformanceisranked(from1to3)and theylearnhowmanytaskstheirownteamandtheothertwoteams solved.Inadditiontotheshow-upfee,subjectsearnthepiece-ratemul- tipliedwithonethirdofthetotalnumberoftaskstheirteamsolves.¹⁰

Next,weintroduceour“baseline” conditions,wherewedothesame variationsaswithRPF,onlywithAPFinsteadofRPF.

IntheAPF-ind-indtreatment,subjectsearnindividualincentivesand receiveindividualAPF.Importantly,theydonotlearnanythingabout theperformanceofanyothers.Inadditiontotheshow-upfee,subjects earnthepiece-ratemultipliedwiththetotalnumberoftaskstheysolve.

8 Subjectsareonlyinformedabouttheteamperformanceoftheothertwo teams,notabouttheteammember’sperformances.

9 WechoosetoprovideintragroupindividualRPFtokeepthesetupsome- whatrealistic,seeKrameretal.(2016)forasimilartreatment.Analternative wouldbetobasetheindividualRPFontheperformanceoftworandomlycho- sensubjects.However,inateamsetting,thisalternativeisseldomseeninreal workplaces.

10 RPF-ind-indandRPF-team-indarereferredtoasindividualRPFtreatments, whereasRPF-team-teamandRPF-ind-teamarereferredtoasRPFtreatments.

IntheAPF-team-teamtreatment,subjectsearnteamincentivesand receiveteamAPF,ratherthanindividualincentivesandindividualAPF.

Theylearnhowmanytaskstheysolvedthemselvesandthetotaloftheir ownteam.¹¹ However,theydo not learnanythingabouttheperfor- manceofanyotherteams.Inadditiontotheshow-upfee,subjectsearn thepiece-ratemultipliedwithonethirdofthetotalnumberoftaskstheir teamsolves.

TheprimaryuseofAPFtreatmentsistoestablishsomebaselineper- formances.Thus,wehaveonlyincludedAPFtreatmentsthatareofmain interesttocomparewithRPFtreatments.Noticealsothatalltreatments actuallyincludeAPF,andhenceRPFisanadditionalpieceofinforma- tionintheRPFtreatments.

Ourtheoreticalframeworkthatfollowsinthenextsection,propose twoexplanationsastowhypeoplerespondmorepositivelytoteamRPF:

statusconcerns/competitivepreferencesandpeerpressure.Inanef- forttodisentangletheseeffects,weseparatelyrantwoadditional“team leader” treatments,wheresubjectsactedasteamleadersandworked onbehalfoftheirteam.¹²Inthese“teamleader” treatmentswehavere- ducedpeerpressure,atleastintermsofteamspirit,sincetheothersin theteamdonotwork.Weusethesamesetupasintheothertreatments, andtheonlychangesareexplainedbelow.

IntheAPF-teamleadertreatment,subjectsworkonthetaskasthe teamleader.Intheinstructions,subjectsaretoldthattheyhavebeen selectedastheteamleaderinateamofthreesubjects.Duringthebreaks, theyreceivefeedbackonlyabouttheperformanceoftheteamleader.¹³ Incentivesareteam-based:Inadditiontotheshow-upfee,allthreesub-

11Assubjectslearnabouttheperformanceofthemselvesandtheperformance oftheteamintotal,thereissomeinherentinformationaboutrelativeperfor- manceaswell.Knowingthetotaloutputoftheteamwillenabletosubjectto considerwhethertheperformanceisaboveorbelowtheaverageoftheteam, andanimpreciserank.

12Thesetreatmentswereorganizedthefollowingway:Subjectsweretoldin theinstructionsthattheyhadbeenpickedtoleadateamofthree,andthatthe performanceoftheteamdependedonlyontheireffortastheteamleader.Un- knowntotheparticipants,allsubjectswereinfactassignedasateamleader.

Wethenrandomlymatchedallteamleaderswithtwootherpassivemembers, toformallteams.Thus,eachsubjectplayedtworoles,bothasateamleaderand asapassivememberoftwootherteams.Subjectsonlyknewabouttheirroleas theteamleaderduringtheexperiment,andweretoldafterwardsthattheyhad alsobeenapassivememberoftwootherteams.Hence,therewasonlyoneteam leaderperteam.Wepaidsubjectsbothfortheireffortasteamleader,andfor theirroleasteammemberintwootherteams.Therefore,allinformationinthe experimentalinstructionsweretrue,andtherewasnodeception(i.e.theywere allrealteamleaders,andtheteam’sperformanceandteampaymentdepended solelyontheperformanceofthemastheteamleader).Weonlyomittedinfor- mationabouttheirroleaspassivemembersoftwootherteamsuntiltheendof theexperiment.

13Asallsubjectsworkedasteamleaders,thisfeedbackwasinfactonlyinfor- mationabouttheirownperformance(asteamleader).Inotherwords,passive membersofteamsdidnotgetcontinuousfeedbackontheperformanceoftheir teamleader,butthiswasunknowntotheparticipants.Intheexperimentalin- structions,weexplicitlyinformedthemthattheywouldreceivefeedbackabout theirperformanceasteamleader,whichtheyalsodidget.

jectsintheteamearnthepiece-ratemultipliedwithonethirdofthe totalnumberoftaskstheirteamleadersolves.

IntheRPF-teamleadertreatment,subjectsworkonthetaskasthe teamleader.InadditiontothefeedbackprovidedintheAPF-teamleader treatment,theyalsoreceiveteamRPF.Specifically,duringthebreaks, theteamleader’sperformanceisranked(from1to3)againsttheperfor- manceoftwootherteamleadersfromtwootherteams,andtheylearn howmany taskstheysolved.Monetaryincentivesarethesameasin APF-teamleader:Inadditiontotheshow-upfee,allthreesubjectsinthe teamearnthepiece-ratemultipliedwithonethirdofthetotalnumber oftaskstheirteamleadersolves.

Inparticular,theteam’sperformanceisranked(from1to3)and theylearnhowmanytaskstheirownteamandtheothertwoteams solved.

Inordertohighlighttheteamleaderrole,andtominimizeteamspirit effects,welet thepassiveteammembersonlyseetheirteamleader’s performanceattheendoftheexperiment,notduringeachbreak.¹⁴This alsoallowedforasimplerprocedure:Ineachsession,afterallworking periods,theteamleadersweretoldthattheyhavealsobeenapassive memberof twootherteams. Theythenlearnedhowmuch theyhad earnedfromtheirroleasateamleader,andhowmuchadditionally theyhadearnedaspassivemembersoftwootherteams.

2.3. Procedures

TheexperimentwasconductedattheUniversityofStavanger,Nor- way,inMarchandNovember2015andMay2017.Weranthreesessions ofeachtreatmentoverfourdaysinMarch,exceptforthethreesessions inRPF-ind-teamthatweraninNovember.¹⁵Theteamleadertreatments wereconductedinMay2017.Asessionhadupto23participants,and treatmentswithRPForteamsrequiredatotalnumberofparticipants thatcouldbedividedbythree(andprecisely18participantsinRPF-ind- teamandRPF-team-team).Werecruitedsubjectsthroughtheirstudent emailaccountsandpostersontheUniversitycampus,andtheysigned upusingtherecruitmentprogramExpmotor.¹⁶Thestudentpoolcon- sistsofavarietyofstudentsfromthreefaculties:thefacultyofScience andTechnology,thefacultyofSocialSciences,andthefacultyofArts andEducation.¹⁷Theexperimentwasprogrammedandconductedwith thesoftwarez-Tree(Fischbacher,2007).

Werandomlyseatedsubjectswhentheyarrivedinthecomputerlab.

Eachdeskhadapaperwithwritteninstructions,andwereadtheinstruc- tionsaloudbeforethestartoftheexperiment(instructionsattachedin theappendix).Thentheyworkedonthetaskandreceivedfeedbackdur- ingthebreaks.Oncetheexperimentconcluded,weinformedsubjects abouttheirtotaloutputandearnings.Thentheycompletedashortques- tionnaire,whereweaskedforbasicdemographicdetailsandelicited theirexpostperceptionsoftheexperiment.Specifically,weaskedthem howmotivatedtheyweretodothetasks,howtheyfeltrightnow,and

14 Admittedly,thiswasnotmadeexplicitlycleartotheteamleaders,sothe teamleadermighthavebeenundertheimpressionthatthepassiveteammem- bersgotfeedbackabouttheperformanceoftheteamleadereachperiod.How- ever,thisdoesnotalterthebasicrationalebehindthesetwotreatments,namely, toinvestigatesubjectsworkingonbehalfofteams,andtherebydisentangleteam spritfromstatusconcerns/competitivepreferences. Furtherresearchcould eventrytodisentanglethelattertwobyvaryingtowhatextentthepassive teammemberscanobserveRPF.

15 Wehavenoreasontobelievethatthedifferentmonthforthistreatment wouldcauseanydifferencesperse,andpredeterminedcharacteristicsofsub- jectsparticipatinginthistreatmentareverysimilartotheothertreatments,as canbeseenintheappendixTableA1.

16 DevelopedbyErikSørensenandTrondHalvorsenattheNorwegianSchool ofEconomics(NHH).

17 About47%werefemales,andtheaverageagewasjustabove25years.

SlightlymorethanhalfoftheparticipantswereNorwegiancitizens.About13%

ofallparticipantswerestudentsfromanEconomicsprogram.

whethertheythoughttheinformationin-betweeneachstageaffected them.Theyansweredthesequestionsonascalefrom−5to5.

Each sessionlasted about50 min.Theaverage earningsforeach participantswereNOK289 (about$35),which consistedof the100 NOKshow-upfeeandthe189NOKperformance-relatedpay.Atotal of515subjectsparticipatedintheexperiment.Theunevennumberof participantsacrosstreatmentsisduetooverbookingandnoshows.

3. Behavioralpredictions

Wewillnowpresentasimpletheoreticalframeworkenablingusto presentsomebehavioralpredictions,formulatedashypotheses.Ouraim isnottotestthepresentedmodeldirectly,buttoprovideaframework thatenableusfixideasandtodisentanglethedifferentmechanismsat play.

Lettherebenagentsintheeconomicenvironment.Agentiexerts efforte_iincurringaprivatecostc(e_i)where𝑖=1...𝑛,andwherethecost functionhasstandardpropertiesc′(e_i)>0,c″(e_i)>0.Hereceivesawage 𝑤(𝑒_𝑖,…,𝑒_𝑛)andisassumedtohavethefollowingutilityfunction:

𝑈_𝑖=𝑤( 𝑒_𝑖,…,𝑒_𝑛)

−𝑐( 𝑒_𝑖)

+𝜃𝑣( 𝑒_𝑖,…,𝑒_𝑛)

−𝑃( 𝑒_𝑖,…,𝑒_𝑛)

Thefunctionvrepresentswhatwemaycall“rankutility”,i.e.the utilityfromcomparingperformancewithotheragents.Ifagentshave competitivepreferences,theywillenjoyoutperformingothers,butsuf- ferfromperformingworse.¹⁸BuildingonClarkandOswald(1996),we letthecompetitivepreferencestaketheformθ𝑣(𝑒_𝑖−𝑒^∗)wheree^∗isthe benchmarktowhichtheagentscomparethemselves(averageperfor- mance intheirmodel),and𝜃representstheweighttheagentputon rankutility.¹⁹Thisweightcanbeinterpretedasstatusconcerns.

Inaddition,weaddapeerpressurefunctionP,similartoKandeland Lazear(1992).Peerpressureissocialand/ormoralcosts,forexample disutility ofbeingafree-rider, asfunctionsof ownandpeers’effort.

LikeKandelandLazear,weassumethatifanagent’sefforthaspositive externalitiesintermsofincreasingtheotheragents’utility,then^𝜕𝑃_𝑒

𝑖 <0. Inotherwords,agentscanreducepeerpressurebyincreasingtheirown effort. However,peerpressureis alsoafunctionofpeers’effort. For agiveneffortlevelfromagenti,moreeffortfromthepeersincreases peerpressure.Thisway,teamscangenerate“teamspirit” byliftingeach other’seffortviapeerpressure.KandelandLazeardistinguishbetween shameandguilt,whereshameisexternalpressureandguiltisinternal pressure.Withshame,thepeerpressurecostsarerelatedtotheother agents’observationofagenti’seffort,whilewithguilt,theagentsmay feelpeerpressureeveniftheotheragentscannotobservetheireffort.

Letusfirstassumenopeerpressureandno rankutility. Thenin- dividualincentivesofthesimplesttype,𝑤=𝑒_𝑖,clearlydobetterthan teamincentives𝑤=¹

𝑛

∑𝑛 𝑖=1

𝑒_𝑖,sinceoptimaleffortisgivenby1=𝑐^′(𝑒_𝑖) and ¹

𝑛=𝑐^′(𝑒),respectively. Thisis theclassical ¹

𝑛 free-riderproblem.

Withrespecttothetreatmentsexplainedintheprevioussection,sub- jectsintheAPF-ind-indtreatmentareexpectedtooutperformsubjects intheAPF-team-teamtreatment.

Assumingnopeerpressureorrankutilitythereshouldbenoperfor- mancedifferenceacrosstreatmentswithinthesameincentivescheme.

18Thisgeneralspecificationofrankutilityopensforasetofunderlyingpref- erences.Rankutilitymayforinstanceincludesocialpreferencessuchasenvy.

Moreover,onecouldalsoincludewageinv,ratherthanjusteffort.However, thegeneralspecificationalsoopensforthepossibilitythatrankutilityisaf- fectedbywageviaeffort,aseffortaffectswage.Hence,itmaybethat,under performancerelatedpayment,rankutilityfollowsfromwagedifferences.Fi- nally,absoluteperformancefeedbackmayitselfmayprovideutility,whichwe abstractfrominourmodel.

19ThemaindifferencefromClarkandOswald(1996)isthatthereismore informationwithdirectspecificrankcomparedtojustanaverage,whichinour experimentcouldprovideanevenstrongerimpressiononagentswhoreceive thisinformation.

Theoptimalsolutionfortheindividualistomaximizeownpayoff,which happenswithoutanyconcernsabouttheperformanceinformation.

Relaxingtheseassumptions, wefirstallowpeerpressuretoaffect theperformance.Byintroducingpeerpressureinteams,thefree-rider problemcanbereduced.Underteamincentives,thelowereffortfrom agenti,thelowerwagetotheotheragentsintheteam.Ifthishasa personalcostforagenti,then ^𝜕𝑃_𝑒

𝑖 <0.Optimaleffortisthengivenby

1 𝑛−^𝜕𝑃

𝑒𝑖 =𝑐^′(𝑒)andwillthusincreaseeffortcomparedtothecasewithout peerpressure.Whetherornotteamincentivesdoworsethanindividual incentivesnowdependsonthestrengthofthepeerpressurecompared tothesizeof1/nfree-riderproblem.

Assumealsothatagentshavecompetitiveandsocialpreferences.If agentsonlygetinformationabouttheirownperformance,thenwecan assume𝑣=0foralleffortlevels.However,withrelativeperformance feedback(RPF),then ^𝜕𝑣_𝑒

𝑖 >0andhenceRPFmotivateseffort.Ifweuse theform𝑣(𝑒_𝑖−𝑒^∗)thenfeedbackonteamlevel(teamRPF)wouldyield 𝑣(∑

𝑒_𝑖−𝑒^∗)where𝑖=1...𝑡andtisthenumberofagentsintheteam, whilee^∗istheaverageperformanceofotherteams.Giventhisspecifi- cation,thencet.par.themotivationaleffectfromRPF(^𝜕𝑣

𝑒𝑖)isthesame forteamRPFandindividualRPF.

Bothpeerpressureandrankutilityareexpectedtoincreasetheover- allperformanceofsubjects.Forpeerpressure,subjectsshouldincrease efforttoavoidthesocialand/ormoralcostsoflowperformance.For rankutility,peoplegetutilityfromrankingaboveothers,anddisutility forrankingbelow.Inbothcasesthefeedbackinformationfostercom- petition,inwhichsubjectswouldwanttoeithermaintaintheirposition orimproveontheirrelativeposition.Thus,giventhatbothpeerpres- sureandrankutilityareexpectedtoimprovetheoverallperformance ofsubjects,weexpecttheperformanceofsubjectsintreatmentswith anyformofRPFtoexerthighereffortrelativetoAPF(withinthesame incentivescheme).Intermsof treatmentsintroduced intheprevious section,subjectsinRPF-ind-indandRPF-ind-teamareexpectedtoper- formbetterthansubjectsinAPF-ind-ind,andsubjectsinRPF-team-team andRPF-team-indareexpectedtoperformbetterthansubjectsinAPF- team-team.

Hypothesis1.(H1):

A) Underteamincentives,subjectswhoreceiveanyformofRPFperform higherthansubjectswhoonlyreceiveAPF.

B) Underindividualincentives,subjectswhoreceiveanyformofRPFper- formhigherthansubjectswhoonlyreceiveAPF.

Aninterestingquestionishowfeedbackandincentivesinteract.Can teamRPFworkbetterunderteamincentivesandviceversa?Thereare twopotentialmechanismscreatingpositiveinteractioneffects.Thefirst isviapeerpressure:Whenagentsareexposedtobothteamincentives andteamRPF,peerssufferadoubleutilitylossofloweffortfromagent i:lowerteampayandlowerrankutility.Iftheagentshave(standard) concaveutilityfunctionsoverrankandwage(v″<0and/oru″(w)<0), thenthemarginalpositiveeffectofeffortfromagentiontheagentj’s utilityishigherwhentheagentshavebothteamincentivesandteam feedback,comparedtowhenonlyoneofthefeaturesisinplace.The secondmechanismisviastatusconcerns.Agentsmaypotentiallyput differentweightonvwhenitisaboutteamcomparisonsratherthan individualcomparisons,assharingsuccesswithothersorcopingwitha lossbyfindingcommonsupportandcomfortmaydifferfromindividual successorloss.Ifthisdifferenceisafunctionofincentives,i.e.ifagents puthigherweight𝜃onrankvunderteamRPFwhenagentsalsoare exposedtoteamincentives,thenwehavepositiveinteractioneffect.

ThefourRPFtreatmentsvaryalongtwodimensions,individualor teamincentives andindividualor teamRPF. Hence, withindividual incentivesandindividualRPF(RPF-ind-ind)asthestartingpoint,we cangraduallyintroduceteamincentives(RPF-team-ind)andteamRPF (RPF-ind-team)andfinallybothteamincentivesandteamRPF(RPF- team-team)tocaptureanyinteractioneffect.

Hypothesis2. (H2):Thereisapositiveinteractioneffectbetweenteam incentivesandteamRPF.

Inourframework,heterogeneousresponsestoRPFcanalsogivein- sightintowhetherstatusperseplays arole.Givenourspecification, unobservedabilitydifferencesshouldputmore peerpressureonlow abilityworkers.Hence,teamRPFshouldpotentiallyhaveastrongeref- fectonlowperformingagentsifpeerpressureisimportant.Moreover, differencesinabilityand/orperformancewithinateamdoesaffectrank utilityvinourspecification.Hence,ifoneobserveshigherteamRPFre- sponsefromthetopperformerswithinteams,theplausibleexplanation wouldbethattheweightonstatusconcerns,𝜃,differsbetweenagents.

Giventheexperimentaldesign,wecancomparetheperformanceofthe leastproductiveandmostproductiveagentsacrosstreatments.²⁰Within thesameincentivescheme,weexpectlow(high)performingagentsin theteamRPFtreatmentstooutperformlow(high)performingagentsin bothAPFandindividualRPFtreatments.

Hypothesis3. (H3):Withinthesameincentivescheme,low(high)per- formingsubjectsinteamRPFoutperformlow(high)performingsubjectsin theothertreatments.

Previousresearchongenderdifferenceshassuggestedthatgender maybeanimportantvariabletoexplaining differentresponsestoin- centivesandinformation,asnotedintheintroduction.Inparticular, females mayhave weakercompetitivepreferences,andthus putless weighton𝜃inourframework.Indeed,relatedresearchbyAzmatand Iriberri(2016)dofindthattheresponsetoindividualRPFisentirely drivenbymalesintheirsetting.BytheintroductionofteamRPF,how- ever,thismaychange.Thereareempiricalevidencesuggestingthatfe- malesarelessaversetocompetitioninteams(HealyandPate,2011; Dargnies, 2012) and that they are more likely to enter into team- basedenvironmentsthanmales(KuhnandVilleval,2015).Importantly, Floryetal.(2015)findthathiringintoteamswithcompetition-based paysubstantiallyattenuatedthegenderdifferencestheyobservedwhen hiringintoindividualcompetition-basedpay.Thismayimplythatthey putmoreweighton𝜃inateam-basedenvironment.Inturn,thismay leadtolessornogenderdifferenceinperformancewithteams.Hence, weonlyexpectmalestorespondtoindividualRPF,inlinewithprevi- ousfindings.Moreover,withinthesameincentivescheme,weexpect femalestorespondmorepositivelytoteamRPFcomparedtoAPFand individualRPF.

Hypothesis4. (H4):FemalesintreatmentswithteamRPFoutperformfe- malesinothertreatments.

RecallthattherearetworeasonswhyteamRPFmayhaveadiffer- enteffectthanindividualRPFinourframework.First,asnotedabove, agentsmaypotentiallyputdifferentweightonvwhenitisaboutteam comparisonsratherthanindividualcomparisonsi.e.𝜃maybedifferent underindividualRPF, comparedtoteamRPF. Second,peerpressure workswithteamRPF,alsointheabsenceofteamincentives.Ifpeers careaboutrankutility,thentherearepositiveexternalitiesfromeffort evenwithoutteamincentives,andhence ^𝜕𝑃_𝑒

𝑖 <0,underteamRPF.In otherwords,teamRPFpersecancreatepeerpressure.

Whilethelattereffect(peerpressure)makesteamRPFstrongerthan individualRPF,theformer(status)cangobothways.Theextentthat statusperseplaysaroleinteamsettingscanbeinvestigatedbystudying teamswithnopeerpressure.Itmightnotbefullypossibletoremove allpeerpressure,butitisnaturaltoassumethatthelowerthepeers’

effort,theloweristhepeerpressuretoworkhard,atleastintermsof peerpressureasdefinedbyKandelandLazear(1992).Hence,ifstatus matters,thenteamRPFmayworkwelleveniftheotheragentsdonot exerteffortatall.Ifthisisthecase,teamRPFmaybeefficient also

20Aswedonothaveanexantemeasureofability,theirpositioningintheper- formancedistributionmaybecorrelatedwiththetypeoffeedbacktheyreceive.

222528313437Average performance

1 2 3 4 5 6

Stage

APF-team-team RPF-team-team APF-ind-ind

222528313437

1 2 3 4 5 6

Stage

RPF-ind-ind RPF-ind-team RPF-team-team RPF-team-ind

Fig.1.Averageperformanceacrossstages.

whentheagentworksonbehalfoftheteam(as,say,teamleader)and notonlywhenheworksalongwithotherteammembers.Thisiswhat weseektoinvestigateintheteamleadertreatments;weaimtoreduce peerpressure,inordertoseeiftherearestilldifferencesinperformance betweenteamAPFandteamRPF.²¹

Hypothesis5. (H5):TeamleaderswhoreceiveteamRPFoutperformteam leaderswhoreceiveteamAPF.

4. Experimentalresults

Inthissection,wepresentourexperimentalresults.Fig.1intendsto giveanoverviewoftheaverageperformanceofsubjectsineachtreat- mentacrossallstages.Ascanbeseen,theaverageperformanceincreases throughouttheexperiment,likelytobedrivenbyexpectedlearningef- fects.Thedecodingschemeremainsunchangedacrossallstages,and thussubjectsarelikelytomemorizemoredecodesasstagesgoby.The performancesareverysimilaracrosstreatments,buttheperformances ofsubjectsinAPF-team-teamandRPF-team-indarenotablylowerthan

21 Importantly,whenotheragentsdonotexerteffortatall,themoralcost ofunderperformingrelativetoothersintheteamorfree-ridingisnolonger relevant.Despitethis,theremightstillothertypesofpeerpressurepresent,for example,thatearningsnowdependentirelyontheperformanceoftheteam leader.

theperformancesofsubjectsintheothertreatments.Thiswillbemore formallyanalyzedbelow.

4.1. Maintreatmenteffects:non-parametrictestsandregressionanalysis

Weuse thenon-parametric testsMann-WhitneyU test(MW)and Randomization test (RT)²² when comparing means throughout this section, besides when referring to regression analysis. In the non- parametrictests,weusethesubject’saverageoutputwheneverwerefer toperformanceacrossallstages.²³

Theregressionanalysisprovidesamoreformaltestofdifferences across treatments,in whichwecan alsocontrolforotherpotentially importantcharacteristics.²⁴ReportedinTable2areOLSandRandom EffectsGLSestimations,controllingforotherfactorssuchasageand

22TheStataprogrampermtest2byKaiser(2007)isusedtoconducttheRan- domizationtests.ThistestisapowerfulalternativetoMann-WhitneyU-test,and isincludedtoshowthatourestimatesarerobusttotwodifferentnon-paramet- ricestimationapproaches.Severalresearchershaverecentlydiscussedtheuse ofRandomizationtestinexperimentalpapers(e.g.,ImbensandRubin,2015; Young,2018)asanimportantcomplementtotheanalysis.TheRT-testsare basedon200.000simulations.

23WedonotuseaclusterversionofMW.

24Intheappendix,TableA-,wecheckforrandomizationacrosstreatments.

Someminordifferencesexist,socontrollingforsuchdifferencesmayproveim- portanttotherobustnessofourfindings.

Table2

Mainresults:treatmenteffectsonproductivity.

Stage(s): 1st stage 2nd stage All stages

(1) (2) (3)

APF-team-team Ref. Ref. Ref.

APF-ind-ind 3.147 ^∗∗∗ 2.201 ^∗∗∗ 2.582 ^∗∗∗

(0.8371) (0.3387) (0.5722) RPF-ind-ind 3.668 ^∗∗ 2.717 ^∗∗∗ 3.595 ^∗∗∗

(1.3137) (0.4953) (0.8358) RPF-ind-team 3.622 ^∗∗∗ 2.863 ^∗∗∗ 3.917 ^∗∗∗

(1.2263) (0.8106) (0.6737) RPF-team-team 2.639 2.734 ^∗∗ 3.525 ^∗∗∗

(1.8604) (1.1023) (1.3004) RPF-team-ind 2.455 ^∗ 1.527 ^∗∗ 1.637 ^∗∗

(1.3004) (0.6038) (0.6558)

Stage t 2.384 ^∗∗∗

(0.0772) Constant 31.524 ^∗∗∗ 35.125 ^∗∗∗ 32.546 ^∗∗∗

(3.0159) (2.6259) (2.6870) Adjusted R ² 0.095 0.059

Number of clusters 18 18 18

Observations 338 338 2028

Notes:OLScoefficientsreportedincolumns(1)– (2)andRan- domEffectsGLScoefficientsreportedincolumn(3),with robuststandarderrorsinparentheses,correctedforcluster- ingacrosssessions.Dependentvariableisnumberofsolved tasks.Allcolumnshavethefollowingcontrolvariablesin- cluded:Timeonthedayofthesession(FEinpanel),age, averagegradesatUniversitylevel,adummyforgender,a dummyforeconomicsstudentsandadummyforNorwegian nationality.

∗p<0.10

∗∗p<0.05

∗∗∗p<0.01.

gender.^25,26APF-team-team isthebaseline(referencegroup).Wein- cludeacolumn forthe1ststage,the2ndstage, andacolumn ofall stages(theremainingstagesarein theappendix,TableA2).The1st stageisa“kick-off” stage,asanytreatmenteffectofRPFisdrivenby theknowledgeaboutfuturefeedback,andnotaresponsetothefeed- backitself(asfoundine.g.,BlanesiVidalandNossol,2011).The2nd stageisthefirstworkingstageafteranyfeedbackisprovided,andthe cleanestwaytoidentifyanytreatmenteffectsofRPF.Weusemultiple observationspersubjectwheneverwerefertoallstagesintheregression analysis(i.e.oneobservationpersubjectperstage).

4.1.1. Performancedifferencesacrossindividualandteamincentives Consider first the performance differences across individual and teamincentives,whensubjectsonlyreceiveAPF.Comparingthetwo

25 Intheregressions,weuserobuststandarderrorsclusteredonsessions.How- ever,asthenumberofclustersislow,itcoulddownwardbiasstandarderrors.

Therefore,weuseamoreconservativeapproachofonlyhaving(C-1)degrees offreedomwhenstatingp-values,whereCisthenumberofclusters.

26 Alternatively,wecouldincreasethenumberofclustersbyapplyingthesec- ondhighestlevelofclusters.Thisisatthelevelwhereteamsreceivefeedback relativetotwootherteamsintheteamRPFtreatments,i.e.ninesubjects“in- teract” andmustbepartofthesamecluster.Fortheothertreatments,thelevel ofinteractionisateitherthreesubjectsoronlyonesubject.Thus,inorderto getacommonlevelofclusters,weconstructedquasiclustersofninesubjects forthesetreatmentsaswell.Thismeansthatnotallsubjectswithinaquasi- clusterinteractwitheachother,butallthatdointeractarecertainlypartofthe samecluster.Thisapproachonlyprovidedmarginaldifferencestotheresults presentedinthepaper.TheonlypartwithnotabledifferencesisSection4.2, wheresignificancelevelsdropto5%levelor10%level.Forthisapproachin theanalysisofgender,theinteractionbetweenteamRPFandteamincentive nolongerremainsignificantformales,andtheothervariablesdropslightlyin significance.

APFtreatments,²⁷theaverageperformanceinAPF-ind-ind(32.4)issig- nificantlyhigher(MW: p=0.01,RT:p=0.01)thaninAPF-team-team (29.6).²⁸ThisissupportedbytheregressionanalysisinTable2;seein particularthehighlysignificantcoefficientofAPF-ind-indincolumn(3).

Inotherwords,intheabsenceofrelativeperformancefeedback,perfor- manceishigherunderindividualincentivesthanteamincentives.This couldbearesultofthefree-riderproblemdiscussedinSection3,assub- jectsworkingunderindividualincentivessolve,onaverage,almost10%

moretasksthanthoseworkingunderteamincentives.Thisisalsocon- sistentwithpreviousempiricalfindingsoffree-ridingactivityinteams (seee.g.,Corgnetetal.,2015).

4.1.2. Theeffectsofrelativeperformancefeedbackonperformanceunder teamincentives

Underteamincentives,anyeffectsofRPFonperformancewillap- pearasadifferenceinperformanceacrossAPF-team-teamandthetwo treatments RPF-team-team and RPF-team-ind. We compare the per- formance across RPF-team-team and APF-team-team first. The aver- ageperformanceinRPF-team-team(32.6)issignificantlygreater(MW:

p=0.09,RT:p=0.02)thaninAPF-team-team(29.6).²⁹Theregression analysisinTable2supportsthisfinding,asthecoefficientRPF-team- teamispositiveandhighlysignificant,seeinparticularcolumn(3).The effectisconsistentthroughoutallworkingstages;seeTableA2inthe appendixfordetailsonallstages.Thisdifferencecanalsobeobserved intheleftgraphofFig.1.Theperformanceisabout10%higherinRPF team-teamcomparedtoAPF-team-team.Theeffectseemstobepresent fromtheverybeginningoftheexperiment,suggestingthatknowledge aboutthefutureperformancefeedbackperseisenoughtoinducesub- jectstoexerthighereffort.

Next,weconsidertheperformanceofsubjectsacrossAPF-team-team andRPF-team-ind.Thenon-parametrictestsshownosignificantdiffer- encein overallperformanceacrossthesetreatments,seeTableA4in theappendix.However,theregressionanalysisinTable2suggeststhat subjectsexerthighereffortinRPF-team-indrelativetothebaseline.This differenceweakensinthefinalstagesoftheexperiment,ascanbeseen inTableA2.Thus,therearesuggestiveevidenceofatreatmenteffect alsoforindividualRPF,butclearlyweakerthanforteamRPF.

Result1:Underteamincentives,performanceishigherwithbothteam RPFandindividualRPFrelativetoteamAPF.ThissupportsH1(A).

Finallyunderteamincentives,wecomparetheperformanceinRPF- team-teamtoRPF-team-ind.Non-parametrictestsshowthattheperfor- manceinRPF-team-teamissignificantlyhigherthaninRPF-team-ind, butonlyfromstage2andonward(MW:p=0.09,RT:p=0.03).³⁰Re- gression analysisfindno overalldifferencewhenstage1is included (Table2),butwhentheanalysisisdoneforstages2–6onlythediffer- enceissignificant(p=0.046,seealsoTableA5intheappendix).This differencecanalsobeobservedintherightgraphofFig.1,fromstage2 andonwards.Asthedifferenceonlyexistsfromstage2,itsuggeststhat thisisduetodifferencesintheresponsetothecontentofthefeedback providedinstage1.

27Strictlyspeaking,changingfromindividualtoteamincentivesandfromin- dividualtoteamAPFisamultiplechangeofconditions.However,thereisno realisticmiddlewayofonlychangingincentivesoronlychangingtoteamAPF.

28SeeTableA3intheappendix.Analternativeapproachistouseteamaverage ratherthansubjects’average.Thisalsoprovidesanoverallsignificantdifference withp=0.090.Thedifferencein2^ndstage(29.0vs.26.9)isalsosignificant,MW:

p=0.02andRT:p=0.02.

29SeeTableA4.Usingteamaverage,providesanevenmoreoverallsignificant differencewithp=0.026(basedon38observations).Thedifference(26.9vs.

29.5)inthe2^ndstageisalsosignificant,MW:p=0.04andRT:p=0.01.

30Includingthefirststageleadstoaninsignificantdifference(MW:p=0.13, RT:p=0.05),butconsideringthedevelopmentinperformanceseeninFig.1,it ismoreappropriatetocompareperformancefromstage2andonwards,espe- ciallyifwewanttocapturethereactionsaftertheyobservefeedback.

4.1.3. Theeffectsofrelativeperformancefeedbackonperformanceunder individualincentives

Underindividualincentives,thenon-parametrictestsdonotshow any difference in performance across treatments. The average per- formance in RPF-ind-ind (32.3) is not statistically different (MW:

p=0.42,RT:p=0.91)fromtheperformanceinAPF-ind-ind(32.4),see TableA6intheappendix.Moreover,theaverageperformanceinRPF- ind-team(32.5)isnotstatisticallydifferent(MW:p=0.83,RT:p=0.98) fromtheperformanceinAPF-ind-ind(32.4).Regressionanalysissup- portstheeffectofnoeffectofindividualRPF.However,therearesug- gestiveevidenceofatreatmenteffectofteamRPF.Thecoefficientof RPF-ind-teamissignificantlyhigherthanthecoefficientforAPF-ind-ind (p=0.015)acrossallstages,seecolumn(3)ofTable2.Thisdifference, however,appearsonlyinthefinalthreeworkingstagesoftheexperi- ment.

Result2:Underindividualincentives,performanceishigherwithteam RPF,relativetoindividualAPF.ThispartlysupportsH1(B).

Hence,theoverallpositiveeffectofteamRPFseemstoapplyunder bothincentives,althoughlessprominentlyunderindividualincentives.

ThismaysuggestthepresenceofpeerpressureinteamRPFtreatments, especiallygiventhatthedifferenceonlyappearinthefinalpartofthe experimentunderindividualincentives.Moreover,individualRPFdoes notseemtoimproveperformanceunderindividualincentivesrelativeto individualAPF.Thisissomewhatsurprising.Givenboththetheoretical predictionsofapositiveeffectfromRPFandpreviousempiricalfindings fromrelatedresearch,wewouldexpecttofindsuchaperformancedif- ference.However,asreviewedinSection1,therearealsostudieswho havenotfoundsuchaneffectofRPF(e.g.Erikssonetal.,2009).

Aninterestingcomparison,althoughachangeofmultipleconditions, istocomparetheaverageperformanceofsubjectsinAPF-ind-ind(32.4) toRPF-team-team(32.6).Statisticaltestsrevealnosignificantperfor- mancedifferencebetweenthem(MW:p=0.65,RT:p=0.89),seealso TableA7.Hence,movingfromAPF-ind-indtoAPF-team-team(step1) revealedaperformancedecrease,whichmayindicateafree-riderprob- lem.MovingfromAPF-team-teamtoRPF-team-team(step2)revealeda positiveeffectofteamfeedback.Thenetresultofthesetwostepscancel eachotherout,sothattheadditionoftheteamRPF(step2)seemsto offsettheperformancedecreaseobservedwhenmovingfromindividual toteamincentives(step1).

FromTableA5,columns(1)–(3),weseethattheeffectsdiscussed abovearepersistentthroughouttheworkingstages,andnotablythat subjectsinRPF-team-inddonotperformanybetterthanthebaselineif thefirststageisexcluded.

4.2. Interactioneffects

ConsidernowH2andthefourRPFtreatmentsina2by2design, varyingbetweenindividualincentivesorteamincentivesandindivid- ualRPForteamRPF(seeTable1).³¹Inordertostudyhowteamincen- tivesandteamRPFaffecteachother,weemployaregressionwithan interactiontermbetweenteamincentivescandteamRPFr.Thisgives thefollowingmodel:

𝑦𝑖=𝛼+ 𝛽1𝑐𝑖+ 𝛽2𝑟𝑖+𝛽3𝑐𝑖𝑟𝑖+𝑐𝑜𝑛𝑡𝑟𝑜𝑙𝑠+ 𝜀𝑖,

where𝑐_𝑖=1ifsubjectiis workingunderteam incentives(i.e.,RPF- team-teamorRPF-team-ind),and0ifsubjectiispaidindividualincen-

31 Recallthatthereferenceforcomparisonisnotexactlythesameforsubjects inthetwodifferentindividualRPFtreatments,assubjectsinRPF-ind-indare comparedtotwoothersubjectsinthesession,whereassubjectsinRPF-team-ind arecomparedtotwoothersubjectswithinthesameteam.Onewaytoaddress whetherthisdifferenceaffectsresultsistocomparewithin-teamheterogeneity inperformanceacrosstreatments,i.e.tocomparevariancewithinteamsinRPF team-indwithvariancewithinquasiteamsinRPF-ind-ind.Itturnsoutthatthis variancedonotdiffersignificantly(usingLevene’srobustteststatistic(W_0)for theequalityofvariances).

tives;𝑟_𝑖=1ifsubjectiisprovidedwithteamRPF(i.e.RPF-ind-team orRPF-team-team),and0ifsubjectiisprovidedwithindividualRPF.

ControlsarethesameasindicatedinTable2.Then𝛽1istheeffecton performance(y_i)ofteamincentiveswithoutteamRPF,𝛽2istheeffect ofteamRPFwithoutteamincentives,while𝛽3estimatestheinteraction betweenthem.

InTable3,wecanseethatthereisastrongnegativeeffectofteam incentivesalone,whereasteamRPFalonehasnosignificanteffect.The neteffect ofboth teamincentives andteamRPF isslightly positive, althoughnotsignificant.However,wefindastrongandpositiveinter- actioneffectbetweenteamincentivesandteamRPF.Thissuggeststhat teamfeedbackandteamincentivescomplementeachother,i.e.provid- ingteamRPFpositivelystrengthenstheinfluenceofteamincentives, andviceversa.Thismaybearesultofreinforcedmarginaleffectofef- fortforeachsubjectwhenbothincentivesandteamRPFareinplace, and/orthattheeffectsofteamcomparisonisafunctionofincentives leadingsubjectstoputadifferentweight𝜃onrankv.

Result3:Thereisapositiveinteractioneffectbetweenteamincentives andteamRPF.ThissupportsH2.

4.3. Heterogeneouseffects

Weuseseveralapproachestoinvestigateheterogeneousresponses toperformancefeedback.

Westartbycategorizingeachsubjectwithinateamaseitherbest, worstorneutral,basedontheirperformanceinthefinalstageonly.³²In Fig.2,wedisplaythedifferenceinperformancebetweenthebestandthe worstwithineachteamacrossallstages.Itshowsasubstantiallylarger performancegapbetweenthebestandtheworstperformancewithin eachteamintheRPF-team-teamcomparedtoanyothertreatment.³³In Fig.A1intheappendix,weseethathighperformersintheRPF-team- teamtreatmentdrivethisdifference.

NextinTable4,weincludeadummyvariable(BiT)thattakesthe valueof1wheneverthesubjectiscategorizedas“best” (0otherwise).

Thisvariableistheninteractedwitheachofthetreatments.Thesumof thecoefficientsBiTand[treatmentxBiT]isthenumberofadditional tasksshesolvesrelativetothetwootherswithintheteam.APF-team- teamisthereferencegroup.Thustocomparetheirperformanceacross treatments,saybetween bestperformersinRPF-team-teamandAPF- team-team(thebaseline),onehastotakethedifferencebetweenthem.

Thatis,fortheconcreteexample,onehastosumthecoefficientsfor RPF-team-team andRPF-team-teamxBiT inorder tofindthecorre- spondingestimateddifference.^34,35

ConsistentwithFig.A1,thebestperformersinRPF-team-teamdo significantlybetterthanthebestperformersinthebaseline(p<0.01) andRPF-team-ind(p<0.05).Noticealsothatthetopperformancesin bothtreatmentswithindividualincentivesaresimilartothetopperfor- manceofthebaseline(i.e.theperformancedifferenceisdrivenbythe twoothersubjectsintheteam).

InTable5,werunquantileregressionstoexplorefurtherthehet- erogeneouseffectsacrosstreatments.Intheseregressions,weusethe averageperformanceofeachsubjectsasdependentvariableratherthan thefixedcategorizationofeachteammemberusedabove.Thequantile

32Thismeansthatasubjectwhoiscategorizedas“best” duetoherperfor- manceinthefinalstage,keephercategorizationthroughoutallstageseven thoughshemighthavebeen“neutral” orworst” inapreviousstage.

33NoticethatwehavealsoincludedtheRPF-ind-indforcomparisonandcon- structedthese“teams” basedonthesamesubjectsastheircomparisongroupof twoothersubjects.

34Similarly,tocomparethebestperformerinRPF-team-teamtoRPF-team- ind, thedifferencebetweenthem isthesumofthe coefficients(RPF-team- team+RPF-team-teamxBiT)– (RPF-team-ind+RPF-team-indxBiT.

35NoticethatwhenweinteracttheBiTvariablewiththetreatmentdummies, thetotalnumberofobservationsinthesecellsbecomeonethirdofallsubjects inthattreatment,consequentlyreducingthestatisticalpower.

Table3

Changingincentivesandfeedback.

Stage(s): All stages Stages 1–3 Stages 4–6

(1) (2) (3)

Individual incentives and individual RPF Ref. Ref. Ref.

Team incentives − 2.427 ^∗∗∗ − 2.372 ^∗∗∗ − 2.483 ^∗∗∗

(0.6124) (0.5529) (0.7384)

Team RPF − 0.192 − 0.911 ^∗ 0.526

(0.5348) (0.4729) (0.7219) Team incentives x Team RPF 2.854 ^∗∗∗ 3.235 ^∗∗∗ 2.473 ^∗

(1.0557) (0.9617) (1.2894)

Stage t 2.326 ^∗∗∗ 3.315 ^∗∗∗ 1.728 ^∗∗∗

(0.1032) (0.1837) (0.1469)

Constant 33.002 ^∗∗∗ 28.884 ^∗∗∗ 38.137 ^∗∗∗

(3.0820) (2.5062) (3.9754)

Number of clusters 12 12 12

Observations 1278 639 639

Notes:RandomEffectsGLScoefficientsreported,withrobuststandarderrorsin parentheses,correctedforclusteringacrosssessions.Dependentvariableisnumber ofsolvedtasks.Allcolumnshavethefollowingcontrolvariablesincluded:Time onthedayofthesession(FEinpanel),age,averagegradesatUniversitylevel,a dummyforgender,adummyforeconomicsstudentsandadummyforNorwegian nationality.^∗p<0.10.

∗∗p<0.05.

∗∗∗p<0.01.

5101520

Difference in number of solved tasks between best and worst performers

1 2 3 4 5 6

Stage

RPF-ind-ind RPF-ind-team APF-team-team RPF-team-team RPF-team-ind

Fig.2. Differencebetweenbestandworstper- formersacrosstreatments.

regressionssupportpreviousfindingsinthatthehighestperformancesin RPF-team-teamaresubstantiallylargerthantheothertreatmentswith teamincentives.Moreover,wefindasimilarperformancedifferencefor thehighest performersintheotherteamRPFtreatment.Specifically, highperformingsubjectsinRPF-ind-teamoutperformhighperforming subjectsinAPF-ind-ind(p<0.05).Asthisdifferenceisnotobservedin Fig.2orTable4,itmustbethattherearemultiple highperforming subjectswithinthesameteam.Hence, inRPF-team-team,theperfor- manceseemstobedrivenbythehighperformingindividualwithineach team,whereasinRPF-ind-teamitseemstobedrivenbyhighperforming teams.

Ontheotherhand,therearenodifferencesinperformanceamongst thelowestperformingsubjectsacrossalltreatments.

Result4:Withinthesameincentivescheme,highperformingsubjectsin teamRPFtreatmentsoutperformhighperformingsubjectsinAPFtreatments.

Therearenoperformancedifferenceforlowperformingsubjects.Thispartly supportsH3.

Result 4suggeststhatsubjects’weight on statusconcerns,repre- sented by𝜃in thetheoreticalframework,differbetweentheagents, asweobservehighertopperformancesinteamswithteamRPFcom- paredtoAPFandindividualRPF(atleastunderteamincentives).More- over,itsuggeststhatpeerpressureisnotasinfluentialinthissetting,as thiswouldimplyastrongerresponsefromlowperformingsubjects.The resultalsoilluminatespreviousfindingsshowingthathighperformers aremorewillingtojointeams(Hamiltonetal.,2003)andlessprone tofree-rideunderteamincentives(vanDijketal.,2001).Incontrast, however,highlymotivatedsubjectspreferredtostandaloneinanexper-