There is increasing support for the idea that the current model for teacher compensation—in which teacher pay is determined almost entirely by seniority—is outdated. Many have argued that such a system fails to attract the highest-achieving college graduates who may seek careers where pay will be proportionate to their performance. In addition, some go so far as to argue that paying teachers without regard to student outcomes incentivizes mediocrity, protects the lowest-performing teachers, and undervalues the work of the best teachers. Finally, because teacher pay is typically equal across schools in a district, teachers have no enticement to work in especially challenging settings since their pay will not be adjusted for this extra effort. These ideas are controversial, and not without thoughtful criticism. Many worry that a more differentiated and competitive pay system may attract individuals to the profession with the “wrong” motivations, rather individuals who put their students’ well-bring above all else. Another concern is that the highest quality instruction arises when teachers work collaboratively, but competition among teachers for bonuses may undermine trusting work relationships within schools. Others have argued that extrinsic motivators like monetary bonuses will not have any effect on teachers, who are as a group more intrinsically motivated. Even those who are more comfortable with the theory of merit-pay are skeptical that the kind of data we have on teachers and students can be used in valid ways to fairly determine which teachers deserve the bonuses and which do not. Despite this ongoing debate, merit-pay schemes are already being implemented in districts across the US. In this panel, we take a panoramic view of this issue by juxtaposing behavioral research that examines how teachers are likely to respond to various forms of merit-pay policies alongside evidence of how these policies are changing teacher behaviors in the real world today. The two kinds of research inform one another well; the former helps policy-makers think about how they should anticipate teachers will respond to merit-pay schemes. Indeed various design issues (i.e., tournament, individual vs. school-level, piece-wise) turn out to incentivize teacher behaviors in different ways, and perhaps differently from other professionals. The other papers in the panel present findings from various instantiations of actual merit-pay interventions across diverse settings: Tennessee, Virginia, and Ohio. We can explore the extent to which these particular bonus programs have succeeded in their efforts to retain the most effective teachers and to reward highly qualified teachers who work in the most disadvantaged settings.