Kerstin Grosch, Marcela Ibanez and Angelino Viceisza

Competitive bonuses are commonly used to promote higher productivity in the workplace. Yet, these types of incentives can have subsequent negative spillovers on coworkers' prosocial behavior. We extend this line of research by:

1. Jointly examining whether cooperation and prosocial attitudes towards others decrease.
2. Exploring some mechanisms that might give rise to such effects.
3. Examining the role of pay dispersion.

In a lab-in-the-field experiment, we implement a real-effort task with a 3x2 between-subjects design that varies competitive, threshold, or random payments under two different dispersion levels (high and low). Subsequently, we measure changes in cooperativeness using contributions to the public good and prosocial attitudes based on a social value orientation game. We find that competition reduces cooperation and prosocial attitudes compared to threshold payments when the dispersion of payments is high. Under low payment dispersion, competition does not affect cooperation and prosocial attitudes. A comparison with the random payment scheme suggests that the drop in prosocial attitudes may be partly explained by rivalry and entitlement as winners in a competitive environment become less cooperative than winners in a non-competitive environment.