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Does Team-Based Compensation Give Rise to Problems When Agents Vary in Their Ability?

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  • Claude Meidinger

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  • Jean-Louis Rullière

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  • Marie-Claire Villeval

    ()

Abstract

This paper reports the results of an experiment on how team heterogeneity in terms of productivity influences both the revenue sharing proposed by the principal to the team and the employees' performance. Experimental evidence shows that when the team is heterogeneous, the principal does not try to motivate the agents through her sharing offer. Regardless of the level of team-based compensation, a large amount of free riding occurs since each agent is mainly influenced by his teammate's behavior. In contrast, when the team is homogeneous, agents are better able to cooperate, reciprocating the principal's offer. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Claude Meidinger & Jean-Louis Rullière & Marie-Claire Villeval, 2003. "Does Team-Based Compensation Give Rise to Problems When Agents Vary in Their Ability?," Experimental Economics, Springer;Economic Science Association, vol. 6(3), pages 253-272, November.
  • Handle: RePEc:kap:expeco:v:6:y:2003:i:3:p:253-272
    DOI: 10.1023/A:1026221318302
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    References listed on IDEAS

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    Cited by:

    1. Königstein, Manfred & Ruchala, Gabriele K., 2007. "Performance Pay, Group Selection and Group Performance," IZA Discussion Papers 2697, Institute for the Study of Labor (IZA).
    2. Claude Montmarquette & Jean-Louis Rullière & Marie-Claire Villeval & Romain Zeiliger, 2004. "Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students," Management Science, INFORMS, vol. 50(10), pages 1379-1389, October.
    3. Hong, Fuhai & Hossain, Tanjim & List, John A., 2015. "Framing manipulations in contests: A natural field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 372-382.
    4. Radu Vranceanu & Fouad El Ouardighi & Delphine Dubart, 2013. "Coordination in Teams : A Real Effort-task Experiment with Informal Punishment," Working Papers hal-00857364, HAL.
    5. Landeo, Claudia M. & Spier, Kathryn E., 2015. "Incentive contracts for teams: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 496-511.
    6. Chao, Hong & Croson, Rachel T.A., 2013. "An experimental comparison of incentive contracts in partnerships," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 78-87.
    7. Sandra Maximiano & Randolph Sloof & Joep Sonnemans, 2007. "Gift Exchange in a Multi-Worker Firm," Economic Journal, Royal Economic Society, vol. 117(522), pages 1025-1050, July.
    8. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, Elsevier.
    9. Englmaier, Florian & Gebhardt, Georg, 2010. "Free Riding in the Lab and in the Field," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 344, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    10. Englmaier, Florian & Gebhardt, Georg, 2016. "Social dilemmas in the laboratory and in the field," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 85-96.
    11. repec:hal:journl:hal-00857364 is not listed on IDEAS
    12. Hideo Owan, 2014. "How should teams be formed and managed?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-83, August.
    13. Claudia M. Landeo & Kathryn E. Spier, 2015. "Incentive Contracts for Teams: Experimental Evidence," Working Papers 2015-53, Peruvian Economic Association.
    14. Landeo, Claudia & Spier, Kathryn, 2015. "Incentive Contracts for Teams: Experimental Evidence," Working Papers 2015-9, University of Alberta, Department of Economics.
    15. Philip Babcock & Kelly Bedard & Gary Charness & John Hartman & Heather Royer, 2011. "Letting Down the Team? Evidence of Social Effects of Team Incentives," NBER Working Papers 16687, National Bureau of Economic Research, Inc.
    16. Marilyne Antonetti & Alexandra Rufini, 2008. "Social norms, coordination and collaboration in heterogeneous teams," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 547-554.

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