Gary Charness

UC, Santa Barbara

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NBER Working Papers and Publications

January 2011Letting Down the Team? Evidence of Social Effects of Team Incentives
with Philip Babcock, Kelly Bedard, John Hartman, Heather Royer: w16687
This paper estimates social effects of incentivizing people in teams. In two field experiments featuring exogenous team formation and opportunities for repeated social interactions, we find large team effects that operate through social channels. The team compensation system induced agents to choose effort as if they valued a marginal dollar of compensation for their teammate from two-thirds as much (in one study) to twice as much as they valued a dollar of their own compensation (in the other study). We conclude that social effects of monetary team incentives exist and can induce effort at lower cost than through direct individual payment.
September 2010Competition and the Ratchet Effect
with Peter Kuhn, Marie-Claire Villeval: w16325
In labor markets, the ratchet effect refers to a situation where workers subject to performance pay choose to restrict their output, because they rationally anticipate that firms will respond to higher output levels by raising output requirements or cutting pay. We model this effect as a multi-period principal-agent problem with hidden information, and study its robustness to labor market competition both theoretically and experimentally. Consistent with our theoretical model, we observe substantial ratchet effects in the absence of competition, which is nearly eliminated when competition is introduced; this is true regardless of whether market conditions favor firms or workers.

Published: Gary Charness & Peter Kuhn & Marie Claire Villeval, 2011. "Competition and the Ratchet Effect," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 513 - 547. citation courtesy of

April 2010Lab Labor: What Can Labor Economists Learn from the Lab?
with Peter J. Kuhn: w15913
This chapter surveys the contributions of laboratory experiments to labor economics. We begin with a discussion of methodological issues: why (and when) is a lab experiment the best approach; how do laboratory experiments compare to field experiments; and what are the main design issues? We then summarize the substantive contributions of laboratory experiments to our understanding of principal-agent interactions, social preferences, union-firm bargaining, arbitration, gender differentials, discrimination, job search, and labor markets more generally.

Published: “Lab Labor: What Can Labor Economist s Learn from the Lab?” (with Gary Charness), in Orley Ashenfelter and David Card, eds., Handbook of Labor Economics , volume 4 A . Amsterdam : North Holland, 2011, pp. 229 - 330.

November 2005Pay Inequality, Pay Secrecy, and Effort: Theory and Evidence
with Peter Kuhn: w11786
We study worker and firm behavior in an efficiency-wage environment where co-workers' wages may potentially influence a worker's effort. Theoretically, we show that an increase in workers' responsiveness to co-workers' wages should lead profit-maximizing firms to compress wages under quite general conditions. Our laboratory experiments, on the other hand, show that --while workers' effort choices are highly sensitive to their own wages-- effort is not affected by co-workers' wages. As a consequence, even though firms in our experiment tended to compress wages when wages became public information, this did not raise their profits. Our experimental evidence therefore provides little support for the notion that inter-worker equity concerns can make wage compression, or wage secrecy, a profit-...

Published: Gary Charness & Peter Kuhn, 2007. "Does Pay Inequality Affect Worker Effort? Experimental Evidence," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 693-723.

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