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Relative Rewards within Team-Based Compensation

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Author Info

  • Irlenbusch, Bernd

    ()
    (University of Cologne)

  • Ruchala, Gabriele K.

    ()
    (University College London)

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    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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    Bibliographic Info

    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
    Date of revision:
    Publication status: published in: Labour Economics, 2008, 15 (2), 141-167
    Handle: RePEc:iza:izadps:dp2423

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    Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
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    Related research

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

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    References

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    Cited by:
    1. Sebastian J. Goerg & Sebastian Kube & Ro'i Zultan, 2010. "Treating Equals Unequally: Incentives in Teams, Workers' Motivation, and Production Technology," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 747-772, October.

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