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Relative rewards within team-based compensation

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  • Irlenbusch, Bernd
  • Ruchala, Gabriele K.

Abstract

How to design compensation schemes to motivate team members appears to be one of the most challenging problems in the economic analysis of labour provision. We shed light on this issue by experimentally investigating team-based compensations with and without bonuses awarded to the highest contributors in teams. A purely team-based compensation scheme induces agents to voluntarily cooperate while introducing an additional relative reward increases effort and efficiency only when the bonus is substantial. In this case, however, the data suggests that tournament competition crowds out voluntary cooperation within a team.

Suggested Citation

  • Irlenbusch, Bernd & Ruchala, Gabriele K., 2008. "Relative rewards within team-based compensation," Labour Economics, Elsevier, vol. 15(2), pages 141-167, April.
  • Handle: RePEc:eee:labeco:v:15:y:2008:i:2:p:141-167
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    3. Kräkel, Matthias & Nieken, Petra, 2015. "Relative performance pay in the shadow of crisis," European Economic Review, Elsevier, vol. 74(C), pages 244-268.
    4. Balafoutas, Loukas & Kocher, Martin G. & Putterman, Louis & Sutter, Matthias, 2013. "Equality, equity and incentives: An experiment," European Economic Review, Elsevier, vol. 60(C), pages 32-51.
    5. Fabio Landini, 2012. "The Evolution of Control in the Digital Economy," Department of Economics University of Siena 655, Department of Economics, University of Siena.
    6. Samuel Bowles & Sandra Polania-Reyes, 2011. "Economic incentives and social preferences: substitutes or complements?," Department of Economics University of Siena 617, Department of Economics, University of Siena.
    7. Nax, Heinrich H. & Murphy, Ryan O. & Helbing, Dirk, 2014. "Stability and welfare of 'merit-based' group-matching mechanisms in voluntary contribution game," LSE Research Online Documents on Economics 65444, London School of Economics and Political Science, LSE Library.
    8. Christine Harbring & Bernd Irlenbusch, 2011. "Sabotage in Tournaments: Evidence from a Laboratory Experiment," Management Science, INFORMS, vol. 57(4), pages 611-627, April.
    9. Danilov, Anastasia & Harbring, Christine & Irlenbusch, Bernd, 2014. "Helping in Teams," IZA Discussion Papers 8707, Institute for the Study of Labor (IZA).
    10. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, Elsevier.
    11. Kidd, Michael & Nicholas, Aaron & Rai, Birendra, 2013. "Tournament outcomes and prosocial behaviour," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 387-401.
    12. S. Bowles & S. Polania-Reyes., 2013. "Economic Incentives and Social Preferences: Substitutes or Complements?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
    13. 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.
    14. Bernd Irlenbusch & Janna Ter Meer, 2012. "Fooling the Nice Guys: The effect of lying about contributions on public good provision and punishment," Cologne Graduate School Working Paper Series 03-11, Cologne Graduate School in Management, Economics and Social Sciences.
    15. Samuel Bowles & Sung-Ha Hwang, 2014. "Optimal Incentives with State-Dependent Preferences," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(5), pages 681-705, October.
    16. Hong Chao & Kevin Siqueira, 2013. "Mixed incentive contracts in partnerships," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(2), pages 147-159, June.
    17. Fabio Landini, 2016. "The evolution of control in the digital economy," Journal of Evolutionary Economics, Springer, vol. 26(2), pages 407-441, May.
    18. Steffen Keck & Natalia Karelaia, 2012. "Does competition foster trust? The role of tournament incentives," Experimental Economics, Springer;Economic Science Association, vol. 15(1), pages 204-228, March.
    19. Sebastian J. Goerg & Sebastian Kube & Ro'i Zultan, 2010. "Treating Equals Unequally: Incentives in Teams, Workers' Motivation, and Production Technology," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 747-772, October.
    20. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," UMASS Amherst Economics Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics.
    21. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series 2734, CESifo Group Munich.

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