Relative or absolute incentives?

Working With Pay Pals finds that absolute incentives encourage more productivity than relative incentives. The reasons for this are attributed to either altruism or collusion among the workers. It is still not clear which is the main reason and would be the subject of further research by the authors.
To me this makes sense from the point of view of human nature. I believe that one must measure the improvement or achievement of an individual in all sphere life based on his/her past state and not based on what others have achieved or are capable of achieving. While the achievements of others should serve as benchmarks, it should not be used to reward or penalize (explicitly or via social pressure). You can almost always find someone who is better than you are and this often creates a sense of anxiety and unfulfilment that leads to lower self confidence, self belief and consequently worse performance.