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Abstract

Using a simple production game, we investigate whether public firms perform better when they increase the power of their workers’ incentive schemes. In a laboratory experiment, subjects choose between a ‘public firm’ and a ‘private firm’ with team and individual incentives, respectively. When exposed to individual incentives, workers in the public firm increase effort in one parametrisation, but show a decrease in another. One reason for the latter observation is that reciprocators self-select in the public firm, rendering cooperation profitable.

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 60.

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Date of creation: Mar 2006
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Handle: RePEc:cpb:discus:60

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Find related papers by JEL classification:

• M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics
• C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
• C9 - Mathematical and Quantitative Methods - - Design of Experiments
• L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

This paper has been announced in the following NEP Reports:

• NEP-ALL-2006-03-25 (All new papers)
• NEP-CBE-2006-03-25 (Cognitive & Behavioural Economics)
• NEP-EXP-2006-03-25 (Experimental Economics)
• NEP-LAB-2006-03-25 (Labour Economics)
• NEP-PBE-2006-03-25 (Public Economics)
• NEP-SOC-2006-03-25 (Social Norms & Social Capital)

References

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