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.
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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
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