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Hierarchy and opportunism in teams

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  • van der Heijden, Eline
  • Potters, Jan
  • Sefton, Martin

Abstract

We use an experiment to compare two institutions for allocating the proceeds of team production. Under revenue-sharing, each team member receives an equal share of team output; under leader-determined shares, a team leader has the power to implement her own allocation. Both arrangements are vulnerable to opportunistic incentives: under revenue-sharing team members have an incentive to free ride, while under leader-determined shares leaders have an incentive to seize team output. We find that most leaders forego the temptation to appropriate team output and manage to curtail free riding. As a result, compared to revenue-sharing, the presence of a team leader results in a significant improvement in team performance.

Suggested Citation

  • van der Heijden, Eline & Potters, Jan & Sefton, Martin, 2009. "Hierarchy and opportunism in teams," Journal of Economic Behavior & Organization, Elsevier, vol. 69(1), pages 39-50, January.
  • Handle: RePEc:eee:jeborg:v:69:y:2009:i:1:p:39-50
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    Cited by:

    1. Matthew Ellman & Paul Pezanis-Christou, 2010. "Organizational Structure, Communication, and Group Ethics," American Economic Review, American Economic Association, vol. 100(5), pages 2478-2491, December.
    2. Stefan Grosse & Louis Putterman & Bettina Rockenbach, 2007. "Monitoring In Teams: A Model and Experiment on the Central Monitor Hypothesis," Working Papers 2007-4, Brown University, Department of Economics.
    3. Emrah Arbak & Marie Claire Villeval, 2013. "Voluntary Leadership: Selection and Influence," Post-Print halshs-00664830, HAL.
    4. Daniele Nosenzo & Theo Offerman & Martin Sefton & Ailko van der Veen, 2016. "Discretionary Sanctions and Rewards in the Repeated Inspection Game," Management Science, INFORMS, pages 502-517.
    5. Pieter H.M. RUYS, 2014. "Architecture of an Economy with Social Enterprises: the Relational Capacity Approach," CIRIEC Working Papers 1413, CIRIEC - Université de Liège.
    6. Lopera Baena, Maria Adelaida, 2016. "Evidence of Conditional and Unconditional Cooperation in a Public Goods Game: Experimental Evidence from Mali," Annual Conference 2016 (Augsburg): Demographic Change 145797, Verein für Socialpolitik / German Economic Association.
    7. Markussen, Thomas & Putterman, Louis & Tyran, Jean-Robert, 2016. "Judicial error and cooperation," European Economic Review, Elsevier, vol. 89(C), pages 372-388.
    8. Beekman, Gonne & Bulte, Erwin & Nillesen, Eleonora, 2014. "Corruption, investments and contributions to public goods: Experimental evidence from rural Liberia," Journal of Public Economics, Elsevier, vol. 115(C), pages 37-47.
    9. Ramalingam, Abhijit & Rojo Arjona, David & Schram, Arthur & Van Leeuwen, Boris, 2015. "Authority and Centrality: Power and Cooperation in Social Dilemma Networks," IAST Working Papers 15-23, Institute for Advanced Study in Toulouse (IAST).
    10. repec:eee:joepsy:v:62:y:2017:i:c:p:173-185 is not listed on IDEAS
    11. Gürerk, Özgür & Irlenbusch, Bernd & Rockenbach, Bettina, 2009. "Motivating teammates: The leader's choice between positive and negative incentives," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 591-607, August.
    12. Drouvelis, Michalis & Nosenzo, Daniele & Sefton, Martin, 2017. "Team incentives and leadership," Journal of Economic Psychology, Elsevier, pages 173-185.
    13. Daniele Nosenzo & Martin Sefton, 2012. "Promoting Cooperation: the Distribution of Reward and Punishment Power," Discussion Papers 2012-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    14. Emrah Arbak & Marie-Claire Villeval, 2013. "Voluntary leadership: motivation and influence," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(3), pages 635-662, March.
    15. Ramalingam, Abhijit & Godoy, Sara & Morales, Antonio J. & Walker, James M., 2016. "An individualistic approach to institution formation in public good games," Journal of Economic Behavior & Organization, Elsevier, vol. 129(C), pages 18-36.
    16. Marcela Ibanez & Elke Schaffland, 2013. "The Effect of Outside Leaders on the Performance of the Organization: An Experiment," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 149, Courant Research Centre PEG.

    More about this item

    Keywords

    Leadership Team production Experiment;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D2 - Microeconomics - - Production and Organizations
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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