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From Team Spirit to Jealousy: The Pitfalls of Too Much Transparency

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Author Info

  • Koch, Alexander K.

    ()
    (Aarhus University)

  • Morgenstern, Albrecht

    ()
    (Federal Ministry of Finance)

Abstract

Free riding in team production arises because individual effort is not perfectly observable. It seems natural to suppose that greater transparency would enhance incentives. Therefore, it is puzzling that team production often lacks transparency about individual contributions despite negligible costs for providing such information. We offer a rationale for this by demonstrating that transparency can actually hurt incentives. In the presence of career concerns information on the quality of task execution improves incentives while sustaining a cooperative team spirit. In contrast, making the identity of individual contributors observable induces sabotage behavior that looks like jealousy but arises purely from signal jamming by less successful team members. Our results rationalize the conspicuous lack of transparency in team settings with strong career concerns (e.g., co-authorship, architecture, and patent applications) and contribute to explaining the popularity of group incentive schemes in firms.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1661.

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Length: 42 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1661

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Keywords: teams; reputation; transparency; group incentives; sabotage;

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Cited by:
  1. Koch, Alexander K. & Peyrache, Eloic, 2005. "Tournaments, Individualized Contracts and Career Concerns," IZA Discussion Papers 1841, Institute for the Study of Labor (IZA).

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