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Hierarchy and Opportunism in Teams

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Author Info
Eline van der Heijden () (Department of Economics, Tilburg University)
Jan Potters () (Department of Economics, Tilburg University)
Martin Sefton () (School of Economics, University of Nottingham)

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Abstract

We use an experiment to compare two institutions for allocating the proceeds of team production. Under revenue-sharing, each team member receives an equal share of team output; under leader-determined shares, a team leader has the power to implement her own allocation. Both arrangements are vulnerable to opportunistic incentives: under revenue-sharing team members have an incentive to free-ride, while under leader-determined shares leaders have an incentive to seize team output. We find that most leaders forego the temptation to appropriate team output and manage to curtail free-riding. As a result, compared to revenue-sharing, the presence of a team leader results in a significant improvement in team performance.

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Publisher Info
Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2006-15.

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Date of creation: Sep 2006
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Handle: RePEc:cdx:dpaper:2006-15

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Related research
Keywords: leadership team production experiment

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Find related papers by JEL classification:
C9 - Mathematical and Quantitative Methods - - Design of Experiments
D2 - Microeconomics - - Production and Organizations
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  2. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June. [Downloadable!] (restricted)
    Other versions:
  3. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December. [Downloadable!] (restricted)
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  4. Moxnes, E. & Heijden, E. van der, 2000. "The effect of leadership in a public bad experiment," Discussion Paper 102, Tilburg University, Center for Economic Research. [Downloadable!]
  5. Claude Meidinger & Marie-Claire Villeval, 2002. "Leadership in Teams: Signaling or Reciprocating ?," Post-Print halshs-00178474_v1, HAL. [Downloadable!]
  6. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August. [Downloadable!] (restricted)
  7. van Dijk, Frans & Sonnemans, Joep & van Winden, Frans, 2001. "Incentive systems in a real effort experiment," European Economic Review, Elsevier, vol. 45(2), pages 187-214, February. [Downloadable!] (restricted)
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  9. Olivier Bochet & Talbot Page & Louis Putterman, 2005. "Communication and Punishment in Voluntary Contribution Experiments," Working Papers 2005-09, Brown University, Department of Economics. [Downloadable!]
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  10. Nalbantian, Haig R & Schotter, Andrew, 1997. "Productivity under Group Incentives: An Experimental Study," American Economic Review, American Economic Association, vol. 87(3), pages 314-41, June. [Downloadable!] (restricted)
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  11. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Blackwell Publishing, vol. 38(113), pages 1-12, January. [Downloadable!] (restricted)
  12. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August. [Downloadable!] (restricted)
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  13. Vyrastekova,J. & Soest,D. van, 2002. "Centralized common pool management and local community participation," Working papers 335, University of Bielefeld, Insitute of Mathematical Economics. [Downloadable!]
  14. Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, vol. 72(3), pages 747-780, 05. [Downloadable!] (restricted)
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  15. Jim Engle-Warnick & Robert L. Slonim, 2001. "Inferring Repeated Game Strategies From Actions: Evidence From Trust Game Experiments," Economics Papers 2001-W13, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
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  16. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stefan Grosse & Louis Putterman & Bettina Rockenbach, 2007. "Monitoring In Teams: A Model and Experiment on the Central Monitor Hypothesis," Working Papers 2007-4, Brown University, Department of Economics. [Downloadable!]
  2. Matthew Ellman & Paul Pezanis-Christou, 2007. "Organisational structure, communication and group ethics," UFAE and IAE Working Papers 682.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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