A static model of cooperation for group-based incentive plans
Whenever a company implements a group-based incentive plan for the first time, free-riding may destroy trust among employees and harm performance. We propose a static model to describe how employees make the decision of whether to cooperate or not, which considers material rewards and social preferences. Given the deep uncertainty involved, we conjecture that workers apply the Arrow-Hurwicz criterion, which considers a combination of the best- and the worst-case scenarios. We derive a set of hypothesis from this model that we validate using a dataset of 107 effectively implemented incentive plans.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Samuel Bowles & Herbert Gintis, 2002.
"Social Capital and Community Governance,"
Royal Economic Society, vol. 112(483), pages 419-436, November.
- Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
- Weber, Elke U & Kirsner, Britt, 1997. "Reasons for Rank-Dependent Utility Evaluation," Journal of Risk and Uncertainty, Springer, vol. 14(1), pages 41-61, January.
- Kandel, E. & Lazear, E.P., 1990.
"Peer Pressure and Partnerships,"
90-07, Rochester, Business - Managerial Economics Research Center.
- Singer, Marcos & Donoso, Patricio & Poblete, Francisco, 2002. "Semi-autonomous planning using linear programming in the Chilean General Treasury," European Journal of Operational Research, Elsevier, vol. 140(2), pages 517-529, July.
- 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.
- Nalbantian, Haig & Schotter, Andrew, 1994. "Productivity Under Group Incentives: An Experimental Study," Working Papers 94-04, C.V. Starr Center for Applied Economics, New York University.
- Ernst Fehr & Urs Fischbacher, 2002. "Why Social Preferences Matter -- The Impact of Non-Selfish Motives on Competition, Cooperation and Incentives," Economic Journal, Royal Economic Society, vol. 112(478), pages C1-C33, March.
- Murphy, Kevin J., 2000. "Performance standards in incentive contracts," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 245-278, December.
- Manski, Charles F., 2000. "Identification problems and decisions under ambiguity: Empirical analysis of treatment response and normative analysis of treatment choice," Journal of Econometrics, Elsevier, vol. 95(2), pages 415-442, April.
- Daniel McFadden, 1998.
"Rationality for Economists?,"
98-09-086, Santa Fe Institute.
- Urs Fischbacher & Simon Gaechter & Ernst Fehr, .
"Are People Conditionally Cooperative? Evidence from a Public Goods Experiment,"
IEW - Working Papers
016, Institute for Empirical Research in Economics - University of Zurich.
- Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
- Rabin, Matthew, 1993.
"Incorporating Fairness into Game Theory and Economics,"
American Economic Review,
American Economic Association, vol. 83(5), pages 1281-1302, December.
- Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
- M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
- R. Isaac & James Walker & Susan Thomas, 1984. "Divergent evidence on free riding: An experimental examination of possible explanations," Public Choice, Springer, vol. 43(2), pages 113-149, January.
- Ernst Fehr & Simon Gaechter, 1999.
"Cooperation and Punishment in Public Goods Experiments,"
CESifo Working Paper Series
183, CESifo Group Munich.
- Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
- Ernst Fehr & Simon Gaechter, . "Cooperation and Punishment in Public Goods Experiments," IEW - Working Papers 010, Institute for Empirical Research in Economics - University of Zurich.
- Bossert, Walter & Nosal, Ed & Sadanand, Venkatraman, 1996. "Bargaining under Uncertainty and the Monotone Path Solutions," Games and Economic Behavior, Elsevier, vol. 14(2), pages 173-189, June.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Paul Oyer, 2000.
"Why Do Firms Use Incentives that Have No Incentive Effects?,"
Econometric Society World Congress 2000 Contributed Papers
1440, Econometric Society.
- Paul Oyer, 2004. "Why Do Firms Use Incentives That Have No Incentive Effects?," Journal of Finance, American Finance Association, vol. 59(4), pages 1619-1650, 08.
- Oyer, Paul, 2001. "Why Do Firms Use Incentives That Have No Incentive Effects?," Research Papers 1686, Stanford University, Graduate School of Business.
- Cohen, Michele & Jaffray, Jean-Yves, 1980. "Rational Behavior under Complete Ignorance," Econometrica, Econometric Society, vol. 48(5), pages 1281-99, July.
- Nof, Shimon Y., 1999. "Next generation of production research:: Wisdom, collaboration, and society," International Journal of Production Economics, Elsevier, vol. 60(1), pages 29-34, April.
- Rajiv D. Banker & Joy M. Field & Kingshuk K. Sinha, 2001. "Work-Team Implementation and Trajectories of Manufacturing Quality: A Longitudinal Field Study," Manufacturing & Service Operations Management, INFORMS, vol. 3(1), pages 25-42, November.
- Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps.
- Courty, Pascal & Marschke, Gerald, 2002.
"An Empirical Investigation of Gaming Responses to Explicit Performance Incentives,"
CEPR Discussion Papers
3164, C.E.P.R. Discussion Papers.
- Pascal Courty & Gerald Marschke, 2004. "An Empirical Investigation of Gaming Responses to Explicit Performance Incentives," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 23-56, January.
- Gerald Marschke & Pascal Courty, 2002. "An Empirical Investigation of Gaming Responses to Explicit Performance Incentives," Discussion Papers 02-06, University at Albany, SUNY, Department of Economics.
- Launonen, Martti & Kess, Pekka, 2002. "Team roles in business process re-engineering," International Journal of Production Economics, Elsevier, vol. 77(3), pages 205-218, June.
- Hans-Werner Sinn, 1980.
"A Rehabilitation of the Principle of Insufficient Reason,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 94(3), pages 493-506.
- Sinn, Hans-Werner, 1980. "A Rehabilitation of the Principle of Insufficient Reason," Munich Reprints in Economics 19914, University of Munich, Department of Economics.
- Kenneth L. Schultz & David C. Juran & John W. Boudreau, 1999. "The Effects of Low Inventory on the Development of Productivity Norms," Management Science, INFORMS, vol. 45(12), pages 1664-1678, December.
- Mary Beth Pinto & Jeffrey K. Pinto & John E. Prescott, 1993. "Antecedents and Consequences of Project Team Cross-Functional Cooperation," Management Science, INFORMS, vol. 39(10), pages 1281-1297, October.
- Armin Falk & Urs Fischbacher, .
"A Theory of Reciprocity,"
IEW - Working Papers
006, Institute for Empirical Research in Economics - University of Zurich.
- Seale, Darryl A. & Rapoport, Amnon & Budescu, David V., 1995. "Decision Making under Strict Uncertainty: An Experimental Test of Competitive Criteria," Organizational Behavior and Human Decision Processes, Elsevier, vol. 64(1), pages 65-75, October.
- Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
- Casey Ichniowski & Kathryn Shaw, 2003. "Beyond Incentive Pay: Insiders' Estimates of the Value of Complementary Human Resource Management Practices," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 155-180, Winter.
- Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January.
- David Kelsey & Willy Spanjers, 2004. "Ambiguity in Partnerships," Economic Journal, Royal Economic Society, vol. 114(497), pages 528-546, 07.
- Eichberger, Jurgen & Kelsey, David, 2002. "Strategic Complements, Substitutes, and Ambiguity: The Implications for Public Goods," Journal of Economic Theory, Elsevier, vol. 106(2), pages 436-466, October.
When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:115:y:2008:i:2:p:492-501. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.