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Hierarchy and Opportunism in Teams

  • Eline van der Heijden


    (Department of Economics, Tilburg University)

  • Jan Potters


    (Department of Economics, Tilburg University)

  • Martin Sefton


    (School of Economics, University of Nottingham)

We use an experiment to compare two institutions for allocating the proceeds of team production. Under revenue-sharing, each team member receives an equal share of team output; under leader-determined shares, a team leader has the power to implement her own allocation. Both arrangements are vulnerable to opportunistic incentives: under revenue-sharing team members have an incentive to free-ride, while under leader-determined shares leaders have an incentive to seize team output. We find that most leaders forego the temptation to appropriate team output and manage to curtail free-riding. As a result, compared to revenue-sharing, the presence of a team leader results in a significant improvement in team performance.

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Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2006-15.

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Date of creation: Sep 2006
Date of revision:
Handle: RePEc:cdx:dpaper:2006-15
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  16. Erling Moxnes & Eline van der Heijden, 2003. "The Effect of Leadership in a Public Bad Experiment," Journal of Conflict Resolution, Peace Science Society (International), vol. 47(6), pages 773-795, December.
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