The Effects of Tangible Rewards versus Cash Rewards in Consecutive Sales Tournaments: A Field Experiment

Khim Ong Kelly · Adam Presslee

73 citations0/0 files storedThe Accounting Review

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Experimental Behavioral Economics Studies Accounting and Organizational Management Employee Performance and Motivation

Abstract

ABSTRACT We investigate the effects of tangible versus cash rewards in a repeated tournament setting. Firms frequently use tangible rewards to motivate employees, but minimal research has examined their effects relative to cash rewards. We conducted a field experiment at a rug wholesaler that held two consecutive sales tournaments for its retailers. The top three retailers in each tournament received either cash rewards or tangible rewards (gift cards) to be distributed to sales staff. We do not find significant effects of reward type in the first tournament. However, in the second tournament, retailers eligible for tangible rewards significantly outperformed those eligible for cash rewards, and this effect is driven by Tournament One losers. Our results are consistent with the theory that Tournament One losers competing for tangible rewards increased sales effort in the second tournament significantly more than their counterparts competing for cash rewards. Our results have practical and theoretical implications.

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1985An attributional theory of achievement motivation and emotion.2001Risk as feelings.1985Mental Accounting and Consumer Choice 1981Rank-Order Tournaments as Optimum Labor Contracts 2008Mental Accounting and Consumer Choice 1999Mental accounting matters 1979Rank-Order Tournaments as Optimum Labor Contracts 1981An Economic Theory of Self-Control

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