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The carrot vs. the stick in work team motivation

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David Dickinson

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Abstract

This paper reports on the use of carrot (positive) and stick (negative) incentives as methods of increasing effort among members of work teams. We study teams of four members in a laboratory environment in which giving effort towards the team goal is simulated by eliciting voluntary contributions towards the provision of a public good. We test the efficiency improving properties of four distinct environments: monetary prizes given to high contributors versus monetary fines assessed to low contributors, where high/low contributor is defined first in terms of absolute contributions and then in terms of contributions relative to abilities—which we call handicapping. Our results show that both carrot and stick increase efficiency levels by 11-29%. We find that handicapped incentives promise the highest efficiency levels, and when handicapping is not used certain types of penalties may be more effective than prizes. The implications for work teams and suggestions for practical implementation are discussed.

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Paper provided by Utah State University, Department of Economics in its series Working Papers with number 2000-06.

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Handle: RePEc:usu:wpaper:2000-06

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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. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 1-33, February. [Downloadable!] (restricted)
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  2. Dickinson, David L, 1999. "An Experimental Examination of Labor Supply and Work Intensities," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 638-70, October. [Downloadable!] (restricted)
  3. Edward P. Lazear & Sherwin Rosen, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Palfrey, Thomas R. & Rosenthal, Howard, 1991. "Testing for effects of cheap talk in a public goods game with private information," Games and Economic Behavior, Elsevier, vol. 3(2), pages 183-220, May. [Downloadable!] (restricted)
  5. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December. [Downloadable!] (restricted)
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  6. Dickinson, David L., 1998. "The voluntary contributions mechanism with uncertain group payoffs," Journal of Economic Behavior & Organization, Elsevier, vol. 35(4), pages 517-533, May. [Downloadable!] (restricted)
  7. Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Oxford University Press, vol. 26(4), pages 585-608, October.
  8. Ernst Fehr & Simon Gachter, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September. [Downloadable!] (restricted)
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  9. Nalbantian, Haig R & Schotter, Andrew, 1997. "Productivity under Group Incentives: An Experimental Study," American Economic Review, American Economic Association, vol. 87(3), pages 314-41, June. [Downloadable!] (restricted)
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  10. David L. Dickinson & R. Mark Isaac, 1998. "Absolute and relative rewards for individuals in team production," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(4-5), pages 299-310.
  11. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  12. Martin Sefton & Robert Shupp & James M. Walker, 2006. "The Effect of Rewards and Sanctions in Provision of Public Goods," Caepr Working Papers 2006-005, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington, revised Aug 2006. [Downloadable!]
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  1. Martin Sefton & Robert S. Shupp & James Walker, 2005. "The Effect of Rewards and Sanctions in Provision of Public Goods," Working Papers 200504, Ball State University, Department of Economics, revised Feb 2005. [Downloadable!]
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  2. Bernd Irlenbusch & Gabriele K. Ruchala, 2006. "Relative Rewards within Team-Based Compensation," IZA Discussion Papers 2423, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Croson, Rachel & Konow, James, 2007. "Double Standards: Social Preferences and Moral Biases," MPRA Paper 2729, University Library of Munich, Germany. [Downloadable!]
  4. James Andreoni & William T. harbaugh & Lise Vesterlund, 2002. "The Carrot or the Stick: Rewards, Punishments, and Cooperation," University of Oregon Economics Department Working Papers 2002-01, University of Oregon Economics Department, revised 20 Aug 2002. [Downloadable!]
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