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Absolute and relative rewards for individuals in team production

Author

Listed:
  • David L. Dickinson

    (Department of Economics, Colgate University, Hamilton, NY, USA)

  • R. Mark Isaac

    (Department of Economics, University of Arizona, Tucson, AZ, USA)

Abstract

This paper examines the use of prizes as an incentive device in team production environments. We reward team members in two different ways. First, heterogeneously endowed individuals are given a monetary prize for high absolute levels of contributions. Secondly, a prize is given for high levels of contributions relative to endowment-token endowments represent abilities to contribute to the team. We find that both prize treatments significantly increase group contributions, but rewarding individuals based on absolute contributions also widens the dispersion between the high-contributor and the remainder of the group. Contributions are highest when the prize is for high relative contributions, and the dispersion in contributions is lower than with a prize for absolute contributions. Furthermore, these prizes could be self-funded since giving prizes creates more system-wide wealth than what the prize costs. These results have implications for work team environments in which prizes given for individual effort towards the group goal could raise overall effort levels. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • David L. Dickinson & R. Mark Isaac, 1998. "Absolute and relative rewards for individuals in team production," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(4-5), pages 299-310.
    • Handle: RePEc:wly:mgtdec:v:19:y:1998:i:4-5:p:299-310
    DOI: 10.1002/(SICI)1099-1468(199806/08)19:4/5<299::AID-MDE892>3.0.CO;2-T
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    Citations

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    Cited by:

    1. Esther Blanco & E. Glenn Dutcher & Tobias Haller, 2014. "To mitigate or to adapt? Collective action under asymmetries in vulnerability to losses," Working Papers 2014-27, Faculty of Economics and Statistics, Universität Innsbruck.
    2. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    3. Cason, Timothy N. & Masters, William A. & Sheremeta, Roman M., 2010. "Entry into winner-take-all and proportional-prize contests: An experimental study," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 604-611, October.
    4. 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.
    5. Shupp, Robert & Sheremeta, Roman M. & Schmidt, David & Walker, James, 2013. "Resource allocation contests: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 257-267.
    6. de Vries, J. & de Koster, M.B.M. & Stam, D.A., 2015. "Aligning order picking methods, incentive systems, and regulatory focus to increase performance," ERIM Report Series Research in Management ERS-2015-009-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    7. Cadigan, John & Wayland, Patrick T. & Schmitt, Pamela & Swope, Kurtis, 2011. "An experimental dynamic public goods game with carryover," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 523-531.
    8. David Dickinson, 2001. "The Carrot vs. the Stick in Work Team Motivation," Experimental Economics, Springer;Economic Science Association, vol. 4(1), pages 107-124, June.
    9. Dutcher, Glenn & Saral, Krista, 2022. "Remote Work and Team Productivity," MPRA Paper 115253, University Library of Munich, Germany.
    10. Daniele Nosenzo & Martin Sefton, 2012. "Promoting Cooperation: the Distribution of Reward and Punishment Power," Discussion Papers 2012-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    11. Khadjavi, Menusch & Lange, Andreas & Nicklisch, Andreas, 2017. "How transparency may corrupt − experimental evidence from asymmetric public goods games," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 468-481.
    12. E. Glenn Dutcher & Krista Jabs Saral, 2012. "The Impact of Beliefs on Effort in Telecommuting Teams," Working Papers 2012-22, Faculty of Economics and Statistics, Universität Innsbruck.
    13. Edoardo Mollona & Andrea Marcozzi, 2009. "FirmNet: the scope of firms and the allocation of task in a knowledge-based economy," Computational and Mathematical Organization Theory, Springer, vol. 15(2), pages 109-126, June.
    14. Edoardo Mollona & Andrea Marcozzi, 2009. "Self-emerging coordination mechanisms for knowledge integration processes," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 8(2), pages 223-241, December.
    15. Baethge, Caroline & Fiedler, Marina, 2016. "Aligning mission preferences: Does self-selection foster performance in working groups?," Passauer Diskussionspapiere, Betriebswirtschaftliche Reihe B-18-16, University of Passau, Faculty of Business and Economics.
    16. Choi, Jung-Kyoo & Ahn, T.K., 2013. "Strategic reward and altruistic punishment support cooperation in a public goods game experiment," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 17-30.
    17. Dutcher, E. Glenn & Saral, Krista Jabs, 2012. "Does Team Telecommuting Affect Productivity? An Experiment," MPRA Paper 41594, University Library of Munich, Germany.
    18. Jeremy Clark, 2002. "Recognizing large donations to public goods: an experimental test," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(1), pages 33-44.
    19. 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.
    20. E. Glenn Dutcher & Regine Oexl & Dmitry Ryvkin & Tim Salmon, 2021. "Competitive versus cooperative incentives in team production with heterogeneous agents," Working Papers 2021-26, Faculty of Economics and Statistics, Universität Innsbruck.
    21. Irlenbusch, Bernd & Ruchala, Gabriele K., 2008. "Relative rewards within team-based compensation," Labour Economics, Elsevier, vol. 15(2), pages 141-167, April.
    22. Koch, Christian & Nikiforakis, Nikos & Noussair, Charles N., 2021. "Covenants before the swords: The limits to efficient cooperation in heterogeneous groups," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 307-321.
    23. Irlenbusch, Bernd & Ruchala, Gabriele K., 2006. "Relative Rewards within Team-Based Compensation," IZA Discussion Papers 2423, Institute of Labor Economics (IZA).

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