DP3164 An Empirical Investigation of Gaming Responses to Explicit Performance Incentives

Author(s): Pascal Courty, Gerald Marschke
Publication Date: January 2002
Keyword(s): contract theory, government incentives, moral hazard, multi tasking, performance incentives
JEL(s): J33, L14
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3164

This Paper studies a particular kind of gaming response to explicit incentives in a large government organization. The gaming responses we consider occur when agents strategically report their performance outcomes to maximize their awards. An important contribution of this work is to examine whether this behaviour diverts resources (eg agents' time) from productive activities or whether it simply reflects an accounting phenomenon. We evaluate the efficiency impact of the behaviour we identify and find that it has a negative impact on the true goal of the organization.