Pay Secrecy and Effort Provision

Abstract

The focus for the Centre is research into individual and strategic decision-making using a combination of theoretical and experimental methods. On the theory side, members of the Centre investigate individual choice under uncertainty, cooperative and non-cooperative game theory, as well as theories of psychology, bounded rationality and evolutionary game theory. Members of the Centre have applied experimental methods in the fields of public economics, individual choice under risk and uncertainty, strategic interaction, and the performance of auctions, markets and other economic institutions. Much of the Centre's research involves collaborative projects with researchers from other departments in the UK and overseas. Abstract:Pay secrecy is often justified on the ground of concerns about the detrimental consequences of intra-firm pay comparisons for work morale and performance. Surprisingly, however, there is only limited empirical evidence that the availability of pay comparison information is detrimental for effort provision. In this paper we study pay comparison effects in a giftexchange game laboratory experiment where an employer is matched with two symmetric employees. We compare effort choices made by employees in a 'pay secrecy' treatment and in two 'public wages' treatments where employees are informed of the wage paid to the coworker. In one 'public wages' treatments the employer can choose both wages she pays to the employees, while in the other treatment the wage paid to one employee is regulated exogenously. We show that pay disclosure can be detrimental for effort provision if employees are treated unequally.

The Impact of Social Comparisons on Reciprocity*

“…Field studies that have explored the relation between pay dispersion within an organization and its performance have produced mixed results (e.g., Cowherd and Levine, 1992; Main et al , 1993; Eriksson, 1999; Hibbs and Locking, 2000). The empirical evidence from laboratory experiments is scarce and equally inconclusive, because some experiments report that horizontal fairness concerns can have a negative impact on work effort (Abeler et al , 2010; Clark et al , 2010; Gächter and Thöni, 2010; Nosenzo, 2012; Angelova et al , 2012), while in others such effects are weak or absent (Güth et al , 2001; Charness and Kuhn, 2007). 3…”

“…, we report on a treatment where effort comparison information is not available. For studies that include explicit comparisons of treatments, differing in whether pay comparison information is available or not, see, for example, Charness and Kuhn (2007), Nosenzo (2012), and Greiner et al (2011).…”

Communication and Trust in Principal-Team Relationships: Experimental Evidence

“…Moreover, the same kind of cheap-talk feedback from manager to workers, which increases performance in the single-agent case, can backfire and hamper effort provision in a dynamic promotion tournament between agents (Ederer and Fehr 2007 with standard preference assumptions, one would not expect communication to make a difference. As such, our study is closely related to the widespread debate on the optimal degree of transparency in organizations, in particular with respect to pay secrecy (Charness and Kuhn 2007, Cabrales and Charness 2011, Greiner et al 2011, Nosenzo 2013, Lount and Wilk 2014. Furthermore, our results add an important piece to the picture of the effectiveness of gift exchange in complex, multi-agent employment relations (Maximiano et al 2007, Bartling and von Siemens 2011, Gächter et al 2012, 2013, Gose and Sadrieh 2014.…”

“…As such, our study is closely related to the widespread debate on the optimal degree of transparency in organizations, in particular with respect to pay secrecy (Charness and Kuhn 2007, Cabrales and Charness 2011, Greiner et al 2011, Nosenzo 2013, Lount and Wilk 2014. Furthermore, our results add an important piece to the picture of the effectiveness of gift exchange in complex, multi-agent employment relations (Maximiano et al 2007, Bartling and von Siemens 2011, Gächter et al 2012, 2013, Gose and Sadrieh 2014. While it seems to be generally possible to establish successful gift-exchange relationships, the necessary prerequisites of perceived fairness, kindness, and trust might turn out as fragile concepts that are apparently susceptible to small and seemingly irrelevant changes in the work environment.…”

Transparência na comunicação do sistema de remuneração: proposta de um instrumento de medida e identificação de fatores determinantes

“…A maior parte da publicação encontrada se concentra nos efeitos da comunicação no comportamento e opiniões dos profissionais, ou seja, se trata de uma análise de consequência (Figura1), abarcando questões como: percepção de justiça (DAY, 2011), satisfação DAY, 2007), instrumentalidade (FUTRELL;JENKINS, 1978;CHARNESS;KUHN, 2007; BAMBERGER; BELOGOLOVSKY, 2010), motivação, e performance dos profissionais (HARTMANN;SLAPNICAR, 2012;NOSENZO, 2013).…”