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Open Access Publications from the University of California

How Budget Contraction and Relative Performance Feedback Affect Performance

  • Author(s): Aksanyar, Yasar Numan
  • Advisor(s): Maciejovsky, Boris
  • et al.

The definition, understanding, and evaluation of performance have been an interest of the marketing, management, psychology, and education literature for a long time. The goal of this dissertation is contributing to the further understanding of the effects of environmental changes on performance, specifically on how budgetary contractions due to economic tightening and changes in feedback affect performance.

The first chapter investigates to what degree budget contractions resulting from reduced pay-rates affect performance by changing risk preferences, and it aims to investigate whether using social priming can mitigate the relationship between budget contraction and risk-taking behavior. Three experimental studies demonstrated that experiencing a budget contraction through pay-rate reductions leads individuals to involve in riskier behavior in both financial and social domains. Individuals who experience reduced pay-rates took more risk by investing more in a risky lottery game and demonstrated more dishonest behavior by cheating more. Moreover, the results of the third experiment display that priming individuals with social concepts alleviated the increased risk-taking behavior experienced after budget contraction.

The second chapter investigates the possible negative effects of providing Relative Performance Information (RPI) on the performance of participants working in a group with individual performance based payment setting. The results of the first experiment demonstrate that when participants lack expertise and need feedback to learn the optimal strategy, providing RPI will hurt average performance. Even though the participants who were ranked at the top and bottom of the ranking scale improved their performance, participants in the middle of the ranking scale performed worse. The second study in this chapter finds that providing RPI on a perceivably easy and unfamiliar task negatively affects the task enjoyment and (absolute and relative) perceived performance at the task by particularly showing that one does relatively poorly compared to their expectation.

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