Competitive Environments and Cheating

The idea that a competitive environment with high rewards makes people more productive is often taken as law by economists and management types. It was trotted out to justify Goldman Sachs's bonus payments during the banking crisis, for example.

But the finance industry in particular might be interested to know that competitive environments, whatever else they do, also make people cheat:

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Christiane Schwieren and Doris Weichselbaumer found out by having 33 men and 32 women at the Universitat Pompeu Fabra in Barcelona spend 30 minutes completing on-screen mazes. Crucially, half the students were paid according to how many mazes they completed whereas the half in the 'highly competitive' condition were only paid per maze if they were the top performer in their group of six students.

The students in the highly competitive condition narrowed their eyes, rolled up their sleeves, focused their minds and cheated. That's right, the students playing under the more competitive prize rules didn't complete any more mazes than students in the control group, they just cheated more.

There is lots of evidence that questions whether money gets people to perform well in jobs or other tasks. But this study presents another problem: Even when a monetary prize does motivate someone to win a competition, it still doesn't necessarily motivate them to win fairly or do good work. And that can often be counterproductive (see the mortgage industry).