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Relative Rewards within Team-Based Compensation

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Author Info
Bernd Irlenbusch () (London School of Economics and IZA Bonn)
Gabriele K. Ruchala () (University College London)
Abstract

How to design compensation schemes to motivate team members appears to be one of the most challenging problems in the economic analysis of labour provision. We shed light on this issue by experimentally investigating team-based compensations with and without bonuses awarded to the highest contributors in teams. A purely team-based compensation scheme induces agents to voluntarily cooperate while introducing an additional relative reward increases effort and efficiency only when the bonus is substantial. In this case, however, the data suggests that tournament competition crowds out voluntary cooperation within a team.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2423.

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Length: 38 pages
Date of creation: Nov 2006
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Handle: RePEc:iza:izadps:dp2423

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Related research
Keywords: teamwork; bonus pools; relative rewards; motivation crowding out; voluntary cooperation; personnel economics; experiments;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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Cited by:
(explanations, 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.)

  1. Sebastian Goerg & Sebastian Kube & Ro'i Zultan, 2007. "Treating Equals Unequally - Incentives in Teams, Workers' Motivation and Production Technology," Bonn Econ Discussion Papers bgse17_2007, University of Bonn, Germany, revised Jan 2008. [Downloadable!]
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