Department of Economics
Florida State University
Tallahassee, FL 32306-2180
Information about this author at RePEc
NBER Working Papers and Publications
|August 2016||Peer Information and Risk-taking under Competitive and Non-competitive Pay Schemes|
with Philip Brookins, Jennifer Brown: w22486
Incentive schemes that reward participants based on their relative performance are often thought to be particularly risk-inducing. Using a novel, real-effort task experiment in the laboratory, we find that the relationship between incentives and risk-taking is more nuanced and depends critically on the availability of information about peers’ strategies and outcomes. Indeed, we find that when no peer information is available, relative rewards schemes are associated with significantly less risk-taking than non-competitive rewards. In contrast, when decision-makers receive information about their peers’ actions and/or outcomes, relative incentive schemes are associated with more risk-taking than non-competitive schemes. The nature of the feedback—whether subjects receive information about pe...