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Competitive Screening of a Heterogeneous Labor Force and Corporate Teamwork Attitude

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  • Tymula, Agnieszka

Abstract

The aim of this paper is to analyze the impact of competition on the structure of incentive schemes, workforce composition and the degree of cooperation within firms. We show that in equilibrium high-ability workers, in order to distinguish themselves from the less able workforce, choose the incentive schemes that strongly rely on their own as well as their teammates' performance. They work harder on their own task and are more team-oriented than less skilled workers. Our paper stresses the sorting role of the incentives and provides a rationale for the emergence of different corporate teamwork practices.

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File URL: http://hdl.handle.net/2123/9543
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Bibliographic Info

Paper provided by University of Sydney, School of Economics in its series Working Papers with number 2013-18.

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Date of creation: Nov 2013
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Handle: RePEc:syd:wpaper:2123/9543

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Postal: Sydney, NSW 2006
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Web page: http://sydney.edu.au/arts/economics
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References

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  1. Michael Kosfeld & Ferdinand A. von Siemens, 2011. "Competition, cooperation, and corporate culture," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 23-43, 03.
  2. Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation for Research in Economics, Yale University.
  3. Ernst Fehr & Klaus M. Schmidt, 2004. "Fairness and Incentives in a Multi-task Principal-Agent Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 453-474, October.
  4. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
  5. Dohmen Thomas & Falk Armin, 2010. "Performance Pay and Multi-dimensional Sorting - Productivity, Preferences and Gender," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  6. Roland Bénabou & Jean Tirole, 2013. "Bonus Culture: Competitive Pay, Screening, and Multitasking," NBER Working Papers 18936, National Bureau of Economic Research, Inc.
  7. Rafael Rob & Peter Zemsky, . "Social Capital, Corporate Culture and Incentive Intensity," Penn CARESS Working Papers 7380c2f90d0b2f362ad71f139, Penn Economics Department.
  8. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  9. Kocher, Martin G. & Strauß, Sabine & Sutter, Matthias, 2006. "Individual or team decision-making-Causes and consequences of self-selection," Munich Reprints in Economics 18162, University of Munich, Department of Economics.
  10. Tor Eriksson & Sabrina Teyssier & Marie-Claire Villeval, 2006. "Self-Selection and the Efficiency of Tournaments," Working Papers 0603, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  11. Alexandre Mas & Enrico Moretti, 2009. "Peers at Work," American Economic Review, American Economic Association, vol. 99(1), pages 112-45, March.
  12. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  14. Tzioumis, Konstantinos, 2008. "Why do firms adopt CEO stock options? Evidence from the United States," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 100-111, October.
  15. Che,Y.K. & Yoo,S.W., 1998. "Optimal incentives for teams," Working papers 8, Wisconsin Madison - Social Systems.
  16. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May.
  17. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
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Cited by:
  1. Bénabou, Roland & Tirole, Jean, 2013. "Bonus Culture: Competitive Pay, Screening, and Multitasking," CEPR Discussion Papers 9419, C.E.P.R. Discussion Papers.

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