Silent or Salient? Ability Heterogeneity in Tournaments

SYNOPSIS I experimentally investigate the influence of the degree heterogeneity among employees’ abilities and the salience of this knowledge on the effectiveness of relative performance information (RPI) on performance in tournaments. Consistent with predictions, results show that RPI is more motivating or effective when employees’ abilities are of similar levels, or homogeneous, and also the knowledge of abilities is more highly salient than when employee abilities are perceived as more heterogeneous. Also, making homogeneous ability salient affects high and low performers differently. The results suggest that firms should be conscious of employee ability differences when using tournament incentives. Disclosing the low ability difference benefits firms when the participating employees are relatively homogeneous in ability, whereas the cost of not disclosing becomes high among the best employees. Data Availability: Data are available from the author upon request. JEL Classifications: J24; D83; D84; M41; M52.