We analyze competition between workers in a gift-exchange experiment where two workers are hired by the same employer. In the competition treatment the two employees simultaneously choose their effort whereas in the baseline treatment competition cannot occur since there is only one employee per...

This paper shows that prior financial incentives induce a crowding out effect when incentives are discontinued. In our real-effort experiment workers receive a piece rate before monetary incentives are substituted by a one-time payment. In this case, workers' performance significantly drops when...