Rank-Based Incentives in Team Production: Nonlinear Effects in a Voluntary Contribution

We study a voluntary contribution mechanism (VCM) with intragroup competition, in which individuals’ marginal returns depend on their contribution rank within the group. By systematically varying the strength of rank-based incentives, we derive theoretical predictions and test them in a laboratory experiment. We find that intragroup competition significantly increases contributions, but the response is highly nonlinear: contributions increase sharply once incentives become sufficiently strong to support an efficient equilibrium, but further increases in incentive intensity generate only modest additional effects. These findings highlight how incentive design shapes cooperation and provide new insights into the effects of relative performance incentives in public goods environments.