Keeping Them in the Game: The Effects of Performance Targets on Effort Regulation and Retention in Tournaments

Tournament incentive schemes reward workers based on their performance compared to other workers. I examine whether a manager should set a target to motivate workers who struggle to compete against high performing peers. I find that rather than motivating workers to work harder, a target encourages workers to stop competing against peers and instead focus only on the easier target. I also find that depending on the extent to which performance information about other workers is available, targets either increase or decrease the number of workers who stop working on the task altogether.