Monetary and Social Incentives in Multi-Tasking: The Ranking Substitution Effect

Abstract

Rankings are intended as incentive tools on labor markets. Yet, when agents perform multiple tasks - not all of which can be ranked with respect to performance -, rankings might have unintended side-effects. Based on a dynamic model of multi-tasking, we present an experiment with financial professionals in which we identify hidden ranking costs when performance in one task is ranked while in another prosocial task it is not. We find that subjects lagging behind (leading) in the ranked task devote less (more) effort to the prosocial task. We discuss implications for optimal incentive schemes in organizations with multitasking.