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SUMMARY:Heterogeneous effects of performance pay with market competition: 
 Evidence from a randomized field experiment - Professor Tobias Kretschmer\
 , LMU Munich
DTSTART:20180227T170000Z
DTEND:20180227T180000Z
UID:TALK101770@talks.cam.ac.uk
CONTACT:Emily Brown
DESCRIPTION:It is well established that the effectiveness of pay-for-perfo
 rmance (PfP) schemes depends on employee- and firm-specific factors. Much 
 less is known about the role of factors outside the firm.\nWe investigate 
 the role of market competition on the effectiveness of PfP. Our theory pos
 its that\nthere are two counteracting effects\, a business stealing and a 
 competitor response effect\, that jointly generate an inverted U-shape rel
 ationship between PfP effectiveness and competition. Weak competition crea
 tes low incentives to exert effort because there is little extra market to
  gain\, while strong competition creates low incentives as competitors res
 pond more. PfP hence has the strongest effect for moderate competition. We
  test this prediction with a field experiment on a retail chain which conf
 irms our theory and refutes alternative explanations.\n
LOCATION:Fadi Boustany Lecture Theatre\, Cambridge Judge Business School
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