The Impact of Non-Financial Incentives on Judgmental Forecasting Performance

We analyze the effects of non-financial incentives that provide relative performance feedback on judgmental forecasting performance. Using a controlled laboratory experiment, we find that the provision of such non-financial incentives improves judgmental forecasting accuracy, especially when subjects are consistently informed that their ranks are the lowest in the group. This is consistent with loss aversion, i.e., people's tendency to avoid losses is stronger than to acquire gains. Competitors who are behind see their performance as a loss and work harder than those who are ahead to avoid the loss. On the contrary, subjects who are consistently told that they are ranked the first, perform worse as the leading participants tend to slack off. We also find that non-financial incentives when combined with financial reward, impede forecasting performance