Turning Up the Heat: The Discouraging Effect of Competition in Contests

• 成果类型: Article
• 署名作者: Fang, Dawei; Noe, Thomas; Strack, Philipp
• 署名单位: University of Gothenburg; University of Oxford; Yale University
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• 发表日期: 2020
• 页码: 1940-1975
• 关键词: PERFORMANCE EVALUATION; SALES CONTESTS; optimal-design; COMPENSATION; turnover; prizes

摘要

We study contests in which contestants are homogeneous and have convex effort costs. Increasing contest competitiveness, by making prizes more unequal, scaling up the competition, or adding new contestants, always discourages effort. These results have significant implications: although often criticized as evidence of laxity or cronyism, muting competition (e.g., adopting softer grading curves or less high-powered promotion systems) can both reduce inequality and increase output. Holding promotion contests at the division level rather than the firm level can boost employees' effort. Our results are also consistent with personnel policies that feature egalitarian pay systems and dismissal of worst-performing employees.