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Treating Equals Unequally: Incentives in Teams, Workers' Motivation, and Production Technology

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  • Sebastian J. Goerg
  • Sebastian Kube
  • Ro'i Zultan

Abstract

The importance of fair and equal treatment of workers is at theheart of the debate in organizational management. In this regard,we study how reward schemes and production technologies affect effort provision in teams. Our experimental results demonstrate that unequal rewards can potentially increase productivity by facilitating coordination and that the effect strongly interacts with the exact shape of the production function. Taken together, our data highlight the relevance of the production function for organization construction and suggest that equal treatment of equals is neither a necessary nor a sufficient prerequisite for eliciting high performance in teams. (c) 2010 by The University of Chicago. Allrights reserved.

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  • 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.
  • Handle: RePEc:ucp:jlabec:v:28:y:2010:i:4:p:747-772
    DOI: 10.1086/653487
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    Cited by:

    1. Lewis Evans & Graeme Guthrie & Neil Quigley, 2012. "Contemporary Microeconomic Foundations for the Structure and Management of the Public Sector," Treasury Working Paper Series 12/01, New Zealand Treasury.
    2. López-Pintado, Dunia & Moreno-Ternero, Juan D., 2014. "On discrimination in the optimal management of teams," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 154-162.
    3. Angelovski, Andrej & Brandts, Jordi & Solà, Carles, 2021. "Equal and unequal profit sharing in highly interdependent work groups: A laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 232-252.
    4. Gross, Till & Guo, Christopher & Charness, Gary, 2015. "Merit pay and wage compression with productivity differences and uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 233-247.
    5. Carli, Francesco & Uras, Burak R., 2017. "Joint-liability with endogenously asymmetric group loan contracts," Journal of Development Economics, Elsevier, vol. 127(C), pages 72-90.
    6. Esteban F. Klor & Sebastian Kube & Eyal Winter & Ro'i Zultan, 2011. "Can Higher Bonuses Lead to Less E ort? Incentive Reversal in Teams," Levine's Working Paper Archive 786969000000000073, David K. Levine.
    7. Gueye, Mamadou & Quérou, Nicolas & Soubeyran, Raphael, 2020. "Social preferences and coordination: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 26-54.
    8. Sebastian J. Goerg & Sebastian Kube & Jonas Radbruch, 2019. "The Effectiveness of Incentive Schemes in the Presence of Implicit Effort Costs," Management Science, INFORMS, vol. 65(9), pages 4063-4078, September.
    9. Sven Fischer & Eva-Maria Steiger, 2009. "Exploring the Effects of Unequal and Secretive Pay," Jena Economics Research Papers 2009-107, Friedrich-Schiller-University Jena.
    10. 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.
    11. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    12. Cobo-Reyes, Ramón & Lacomba, Juan A. & Lagos, Francisco & Levin, Dan, 2017. "The effect of production technology on trust and reciprocity in principal-agent relationships with team production," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 324-338.
    13. Benjamin M. Artz & Amanda H. Goodall & Andrew J. Oswald, 2017. "Boss Competence and Worker Well-Being," ILR Review, Cornell University, ILR School, vol. 70(2), pages 419-450, March.
    14. Eva-Maria Steiger & Ro'i Zultan, 2011. "See No Evil: Information Chains and Reciprocity in Teams," Jena Economics Research Papers 2011-040, Friedrich-Schiller-University Jena.
    15. Ljungqvist, Alexander & Raff, Konrad, 2017. "Busy Directors: Strategic Interaction and Monitoring Synergies," CEPR Discussion Papers 12361, C.E.P.R. Discussion Papers.
    16. Marco Kleine & Sebastian Kube, 2015. "Communication and Trust in Principal-Team Relationships: Experimental Evidence," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2015_06, Max Planck Institute for Research on Collective Goods.
    17. Arindrajit Dube & Laura Giuliano & Jonathan Leonard, 2019. "Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior," American Economic Review, American Economic Association, vol. 109(2), pages 620-663, February.
    18. Antonio Filippin & Manuela Raimondi, 2016. "The Patron Game with Heterogeneous Endowments: A Case Against Inequality Aversion," De Economist, Springer, vol. 164(1), pages 69-81, March.
    19. Noy, Shakked & Sin, Isabelle, 2021. "The effects of neighbourhood and workplace income comparisons on subjective wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 918-945.
    20. Steiger, Eva-Maria & Zultan, Ro'i, 2014. "See no evil: Information chains and reciprocity," Journal of Public Economics, Elsevier, vol. 109(C), pages 1-12.
    21. Chmura, Thorsten & Goerg, Sebastian J. & Weiss, Pia, 2016. "Natural groups and economic characteristics as driving forces of wage discrimination," European Economic Review, Elsevier, vol. 90(C), pages 178-200.
    22. Klor, Esteban F. & Kube, Sebastian & Winter, Eyal & Zultan, Ro’i, 2014. "Can higher rewards lead to less effort? Incentive reversal in teams," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 72-83.
    23. Abeler, Johannes & Altmann, Steffen & Goerg, Sebastian J. & Kube, Sebastian & Wibral, Matthias, 2011. "Equity and Efficiency in Multi-Worker Firms: Insights from Experimental Economics," IZA Discussion Papers 5727, Institute of Labor Economics (IZA).
    24. Yingchao Zhang & Oliver Fabel & Christian Thomann, 2015. "Pay inequity effects on back-office employees’ job performances: the case of a large insurance firm," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 23(2), pages 421-439, June.
    25. Eric Mao, 2023. "The Incentive Effects of Tournaments and Peer Effects in Team Production: Evidence from Esports," Journal of Sports Economics, , vol. 24(2), pages 174-192, February.

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    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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