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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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    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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