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Should Managers Use Team-Based Contests?

Author

Listed:
  • Hua Chen

    (School of Business Administration, University of Mississippi, University, Mississippi 38677)

  • Noah Lim

    (Wisconsin School of Business, University of Wisconsin--Madison, Madison, Wisconsin 53706)

Abstract

When designing contests to motivate employees, should managers organize employees to compete in teams or as individuals? We develop a behavioral economics model that shows that if contestants are averse to being responsible for the team's loss, a team-based (TB) contest can yield higher effort than an individual-based (IB) contest. This prediction is contrary to those of standard economics models, which favor IB contests over TB contests. We test the competing predictions using laboratory economics experiments. The results show that when contestants do not know each other, average effort levels in the TB and IB contests are not different. When contestants are allowed to socialize with potential teammates before making effort decisions, TB contests yield higher effort relative to IB contests. We also show that the relative efficacy of TB contests is driven by contestants' aversion to letting their team down.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2013.1743 . This paper was accepted by Peter Wakker, decision analysis.

Suggested Citation

  • Hua Chen & Noah Lim, 2013. "Should Managers Use Team-Based Contests?," Management Science, INFORMS, vol. 59(12), pages 2823-2836, December.
    • Handle: RePEc:inm:ormnsc:v:59:y:2013:i:12:p:2823-2836
    DOI: 10.1287/mnsc.2013.1743
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    References listed on IDEAS

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    Cited by:

    1. Delfgaauw, Josse & Dur, Robert & Souverijn, Michiel, 2017. "Team Incentives, Task Assignment, and Performance: A Field Experiment," IZA Discussion Papers 11228, Institute of Labor Economics (IZA).
    2. Dong, Lu & Huang, Lingbo, 2019. "Is there no ‘I’ in team? Strategic effects in multi-battle team competition," Journal of Economic Psychology, Elsevier, vol. 75(PB).
    3. Philip Brookins & John P. Lightle & Dmitry Ryvkin, 2015. "The effects of communication and sorting on output in heterogeneous weak-link group contests," Working Papers wp2014_01_01, Department of Economics, Florida State University.
    4. Jean-Baptiste Vilain, 2018. "Three essays in applied economics," Sciences Po publications info:hdl:2441/64devegb4f8, Sciences Po.
    5. Brookins, Philip & Lightle, John P. & Ryvkin, Dmitry, 2015. "Optimal sorting in group contests with complementarities," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 311-323.
    6. Fu, Qiang & Ke, Changxia & Tan, Fangfang, 2015. "“Success breeds success” or “Pride goes before a fall”?," Games and Economic Behavior, Elsevier, vol. 94(C), pages 57-79.
    7. Jean-Baptiste Vilain, 2018. "Three essays in applied economics [Trois essais en économie appliquée]," SciencePo Working papers Main tel-03419493, HAL.
    8. Jiabin Wu, 2018. "Indirect higher order beliefs and cooperation," Experimental Economics, Springer;Economic Science Association, vol. 21(4), pages 858-876, December.
    9. Shanglyu Deng & Hanming Fang & Qiang Fu & Zenan Wu, 2020. "Confidence Management in Tournaments," NBER Working Papers 27186, National Bureau of Economic Research, Inc.
    10. Michalis Drouvelis & Johannes Jarke-Neuert & Johannes Lohse, 2021. "Should transparency be (in-)transparent? On monitoring aversion and cooperation in teams," Papers 2112.12621, arXiv.org.
    11. Gjedrem, William Gilje & Kvaløy, Ola, 2020. "Relative performance feedback to teams," Labour Economics, Elsevier, vol. 66(C).
    12. Brookins, Philip & Jindapon, Paan, 2021. "Risk preference heterogeneity in group contests," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    13. Qiang Fu & Changxia Ke & Fangfang Tan, 2013. ""Success Breeds Success" or "Pride Goes Before a Fall"? Teams and Individuals in Multi-contest Tournaments," Working Papers tax-mpg-rps-2013-06, Max Planck Institute for Tax Law and Public Finance.
    14. Brookins, Philip & Lightle, John P. & Ryvkin, Dmitry, 2018. "Sorting and communication in weak-link group contests," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 64-80.
    15. repec:hal:spmain:info:hdl:2441/64devegb4f8l7a342ageb19ehc is not listed on IDEAS
    16. Abhijit Ramalingam & Brock V. Stoddard & James M. Walker, 2021. "Naturally occurring enhancements to competition for talent in teams​," GRU Working Paper Series GRU_2021_021, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    17. Qiang Fu & Ganesh Iyer, 2019. "Multimarket Value Creation and Competition," Marketing Science, INFORMS, vol. 38(1), pages 129-149, January.
    18. Jia Li & Noah Lim & Hua Chen, 2020. "Examining Salesperson Effort Allocation in Teams: A Randomized Field Experiment," Marketing Science, INFORMS, vol. 39(6), pages 1122-1141, November.
    19. Jean-Baptiste Vilain, 2018. "Three essays in applied economics [Trois essais en économie appliquée]," SciencePo Working papers tel-03419493, HAL.
    20. Chapsal, Antoine & Vilain, Jean-Baptiste, 2019. "Individual contribution in team contests," Journal of Economic Psychology, Elsevier, vol. 75(PB).
    21. Huang, Lingbo & Murad, Zahra, 2021. "Fighting alone versus fighting for a team: An experiment on multiple pairwise contests," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 616-631.

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