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Does Team-Based Compensation Give Rise to Problems when Agents Vary in their Ability ?

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Author Info

  • Claude Meidinger

    (TEAM - Théories et Applications en Microéconomie et Macroéconomie - CNRS : UMR8059 - Université Paris I - Panthéon-Sorbonne)

  • Jean-Louis Rullière

    ()
    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

  • Marie Claire Villeval

    ()
    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

Abstract

This paper reports the results of an experiment on how team composition influences both the contract offer of employers and employee performance when a revenue-sharing scheme is introduced. Experimental evidence shows that the principal ceases trying to monitor her team through a contract offer when agents vary in their ability. In this case, agents focus more heavily on their teammate's behaviour than on the principal's offer and therefore, regardless of the level of team-based compensation, a large amount of free-riding occurs within the team. In contrast, when the team is homogeneous, agents are better able to use the contract offer as a coordination device among themselves and therefore achieve higher efficiency.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00179979.

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Date of creation: 2001
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Handle: RePEc:hal:cesptp:halshs-00179979

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00179979
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Related research

Keywords: compensation; experimental economics; free-riding; peer pressure; teamwork;

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  15. Jeffery Carpenter & Samuel Bowles & Herbert Gintis, 2006. "Mutual Monitoring in Teams: Theory and Experimental Evidence on the Importance of Reciprocity," Middlebury College Working Paper Series 0608, Middlebury College, Department of Economics.
  16. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
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Citations

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Cited by:
  1. Claude Montmarquette & Jean-Louis Rulliere & Marie-Claire Villeval & Romain Zeiliger, 2004. "Redesigning teams and incentives in a merger: An experiment with managers and students," Artefactual Field Experiments 00099, The Field Experiments Website.
  2. Chao, Hong & Croson, Rachel T.A., 2013. "An experimental comparison of incentive contracts in partnerships," Journal of Economic Psychology, Elsevier, Elsevier, vol. 34(C), pages 78-87.
  3. Sandra Maximiano & Randolph Sloof & Joep Sonnemans, 2004. "Gift Exchange in a Multi-worker Firm," Tinbergen Institute Discussion Papers 04-100/1, Tinbergen Institute.
  4. Marilyne Antonetti & Alexandra Rufini, 2008. "Social norms, coordination and collaboration in heterogeneous teams," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 547-554.
  5. Florian Englmaier & Georg Gebhardt, 2011. "Free-Riding in the Lab and in the Field," CESifo Working Paper Series 3612, CESifo Group Munich.
  6. Charness, Gary & Kuhn, Peter J., 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," IZA Discussion Papers 4941, Institute for the Study of Labor (IZA).
  7. Königstein, Manfred & Ruchala, Gabriele K., 2007. "Performance Pay, Group Selection and Group Performance," IZA Discussion Papers 2697, Institute for the Study of Labor (IZA).
  8. Philip Babcock & Kelly Bedard & Gary Charness & John Hartman & Heather Royer, 2011. "Letting Down the Team? Evidence of Social Effects of Team Incentives," NBER Working Papers 16687, National Bureau of Economic Research, Inc.
  9. Vranceanu, Radu & El Ouardighi, Fouad & Dubart , Delphine, 2013. "Coordination in Teams: A Real Effort-task Experiment with Informal Punishment," ESSEC Working Papers WP1310, ESSEC Research Center, ESSEC Business School.

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