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Work performance is often difficult to assess thus leaving room for manipulation of commonly-used metrics. We created a laboratory workplace in which we can precisely assess both work performance along with manipulation activities. Using two independent experiments we show that, whenever pay for performance is used, manipulation is pervasive leading to both a waste of organizational resources and a weakening of incentives. By contrast, paying organizational members equally effectively deters manipulation attempts leading to higher organizational production.


NOTICE: this is the author’s version of a work that was accepted for publication in European Economic Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Economic Review, volume 113, in 2019. DOI: 10.1016/j.euroecorev.2018.12.006

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