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The Evolution Of Cooperation In Business: Individual Vs. Group Incentives

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  • Daniel Ladley
  • Ian Wilkinson
  • Louise Young

Abstract

Cooperative relations, within and between firms, play important roles in business. How to produce such relations, however, is less well understood. Building on work in evolutionary biology we examine the conditions under which group based incentives result in better performance than individual based incentives. We find that when individual and group interests are not aligned, group incentive systems lead to both higher group and individual performance. Hybrid reward systems, with both group and individual components, are found on average to be inferior to pure group based systems, but superior for some specific cases.

Suggested Citation

  • Daniel Ladley & Ian Wilkinson & Louise Young, 2013. "The Evolution Of Cooperation In Business: Individual Vs. Group Incentives," Discussion Papers in Economics 13/14, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:13/14
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    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp13-14.pdf
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    More about this item

    Keywords

    Emergence of cooperation; Incentive systems; Iterated games; Group selection;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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