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Equal Pay for Unequal Work: Limiting Sabotage in Teams

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Author Info
Debashis Pal ()
Arup Bose
David Sappington
Abstract

We demonstrate the value of equal pay policies in teams, even when team members have distinct abilities and make different contributions to team performance. A commitment to compensate all team members in identical fashion eliminates the incentive that each team member otherwise has to sabotage the activities of teammates in order to induce the team owner to implement a more favorable reward structure. The reduced sabotage benefits the team owner, and can secure Pareto gains under plausible circumstances.

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File URL: http://www.artsci.uc.edu/collegedepts/economics/research/docs/Wppdf/2008-07.pdf
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Paper provided by University of Cincinnati, Department of Economics in its series University of Cincinnati, Economics Working Papers Series with number 2008-07.

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Length: 20 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:cin:ucecwp:2008-07

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References listed on IDEAS
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  1. Encinosa III, William E. & Gaynor, Martin & Rebitzer, James B., 2007. "The sociology of groups and the economics of incentives: Theory and evidence on compensation systems," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 187-214, February. [Downloadable!] (restricted)
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  2. Kong-Pin Chen, 2003. "Sabotage in Promotion Tournaments," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 119-140, April.
  3. Bartling, Björn & Siemens, Ferdinand von, 2007. "Equal Sharing Rules in Partnerships," Discussion Papers in Economics 2027, University of Munich, Department of Economics. [Downloadable!]
  4. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June. [Downloadable!] (restricted)
  5. Björn Bartling & Ferdinand von Siemens, 2007. "Equal Sharing Rules in Partnerships," Discussion Papers 217, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  6. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May. [Downloadable!] (restricted)
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