It is well-established that the effectiveness of pay-for-performance (PfP) schemes depends on employee- and organization-specific factors. However, less is known about the role of external forces. Investigating the role of market competition on the effectiveness of PfP, we theorize that there...

We show that choices in competitive behavior may entail a gender wage gap. In our experiments, employees first choose a remuneration scheme (competitive tournament vs. piece rate) and then conduct a real-effort task. Employers know the pie size the employee has generated, the remuneration scheme...