Feedback Design and Anticipated Peer Comparison: Theory and Experiment

Abstract

Organizations differ in how they provide feedback that allows individuals to privately compare themselves to their peers. Yet how different feedback designs change effort through the anticipation of peer comparison remains poorly understood. This anticipation activates a competitive motive to outperform peers, and an information motive to shape what individuals infer about their own relative ability. I show theoretically that three standard feedback designs isolate these two motives. In a laboratory experiment, I elicit each participant's effort choice under the three designs. I find that a change in feedback design moves average effort in a way that provides evidence for the existence of both motives. Half of the participants make a different effort choice under at least one of the designs, and among them effort changes substantially. This heterogeneity significantly reorders the resulting ranking. Who ends up at the top therefore depends on a design choice that changes nothing material about the task.