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). The economic model makes a strong prediction in this case. Workers who produce more than the team average should vote for an individual bonus. The only concern that may moderate this preference is risk aversion. Workers lagging behind the team average should vote for a team bonus. The economic model predicts the case at hand fairly well: A high 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; a substantial fraction of low performers prefer an individual bonus. I argue there are two types of other regarding concerns that can explain why these workers prefer a payment system that reduces their income; distributional fairness and social emotions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 13/11.
Length: 16 pages
Date of creation: 15 Nov 2011
Date of revision:
Contact details of provider:
Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Web page: http://www.uib.no/econ/en
More information through EDIRC
Payment systems; risk aversion; social appraisal; fairness.;
Other versions of this item:
- Gaute Torsvik, 2011. "Team or Individual: What Determines Workers' Preferred Bonus Schemes?," CESifo Working Paper Series 3658, CESifo Group Munich.
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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.:
- Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
- John A. List, 2007. "On the Interpretation of Giving in Dictator Games," Journal of Political Economy, University of Chicago Press, vol. 115, pages 482-493.
- Ellingsen, Tore & Johannesson, Magnus & Tjøtta, Sigve & Torsvik, Gaute, 2007.
"Testing Guilt Aversion,"
Working Papers in Economics
14/07, University of Bergen, Department of Economics.
- Fershtman, Chaim & Gneezy, Uri & List, John, 2008. "Equity Aversion," CEPR Discussion Papers 6853, C.E.P.R. Discussion Papers.
- Fehr, Ernst & Schmidt, Klaus M., 1998.
"A Theory of Fairness, Competition and Cooperation,"
CEPR Discussion Papers
1812, C.E.P.R. Discussion Papers.
- 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.
- Englmaier, Florian & Wambach, Achim, 2005.
"Optimal Incentive Contracts under Inequity Aversion,"
IZA Discussion Papers
1643, Institute for the Study of Labor (IZA).
- Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 312-328, July.
- Justin Esarey & Timothy C. Salmon & Charles Barrilleaux, 2012. "What Motivates Political Preferences? Self-Interest, Ideology, And Fairness In A Laboratory Democracy," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 604-624, 07.
- Tore Ellingsen & Magnus Johannesson, 2007. "Paying Respect," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 135-150, Fall.
- Orana Bandiera & Iwan Barankay & Imran Rasul, 2005.
"Social preferences and the response to incentives: Evidence from personnel data,"
Natural Field Experiments
00212, The Field Experiments Website.
- Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 917-962, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kjell Erik Lommerud).
If references are entirely missing, you can add them using this form.