Feedback and Motivation in Dynamic Tournaments

Authors


  • This paper is a revised chapter of my MIT PhD thesis. I thank Daron Acemoglu, Heski Bar-Isaac, Eric Budish, Arthur Campbell, Maya Eden, Jesse Edgerton, Alex Edmans, Ernst Fehr, Daniel Gottlieb, Robert Gibbons, Bengt Holmstrom, Ian Jewitt, Kohei Kawamura, Jin Li, Arijit Mukherjee, Heikki Rantakari, Robert Ritz, Klaus Schmidt, Ron Siegel, Julia Simon-Kerr, Johannes Spinnewijn, Eric Van den Steen, Jean Tirole, and two anonymous referees for helpful comments. I am particularly grateful to Meg Meyer for her guidance at an early stage of this project. I also thank seminar audiences at Oxford, MIT, Zürich, the Econometric Society World Congress 2005, and the NCSU Tournaments Conference for their numerous suggestions. Financial support from ESRC and MIT is gratefully acknowledged. All remaining errors are attributable to me.

Abstract

We investigate the choice to conduct interim performance evaluations in a dynamic tournament. When a worker's ability does not influence the marginal benefit of effort, the choice depends on the shape of the cost of effort function. When effort and ability are complementary, feedback has several competing effects: it informs workers about their relative position in the tournament (evaluation effect) as well as their relative productivity (motivation effect) and it creates signal-jamming incentives to exert effort prior to the performance evaluation. These effects suggest a tradeoff of performance feedback between evaluation and motivation which is in accordance with organizational behavior research and performance appraisal practices.

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