Team or Individual: What Determines Workers' Preferred Bonus Schemes?
AbstractThis paper uses data from a firm with team production to investigate the association between workers’ productivity, risk aversion and preferred bonus scheme (team or individual). Standard economics make a strong prediction in this case. Workers persistently producing above the team average should vote for an individual bonus. The only concern that may moderate this preference is risk aversion. The economic model predicts the case at hand fairly well. Relative work place productivity is strongly associated with a preference for individual bonuses, and risk aversion is associated with a preference for a team bonus. There is, however, one noticeable exception to this pattern: a substantial fraction of low performers prefer an individual bonus. I argue there are two types of other regarding concerns that can explain why under-performers prefer a payment system that reduces their income; distributional fairness and social emotions.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3658.
Date of creation: 2011
Date of revision:
payment systems; risk aversion; social appraisal; fairness;
Other versions of this item:
- Torsvik, Gaute, 2011. "Team or individual: What determines workers' preferred bonus schemes?," Working Papers in Economics 13/11, University of Bergen, Department of Economics.
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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