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Does Team-Based Compensation Give Rise to Problems when Agents Vary in their Ability ?

  • Claude Meidinger

    (TEAM - Théories et Applications en Microéconomie et Macroéconomie - CNRS - UP1 - Université Panthéon-Sorbonne)

  • Jean-Louis Rullière


    (GATE - Groupe d'analyse et de théorie économique - CNRS - UL2 - Université Lumière - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines)

  • Marie Claire Villeval


    (GATE - Groupe d'analyse et de théorie économique - CNRS - UL2 - Université Lumière - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines)

This paper reports the results of an experiment on how team composition influences both the contract offer of employers and employee performance when a revenue-sharing scheme is introduced. Experimental evidence shows that the principal ceases trying to monitor her team through a contract offer when agents vary in their ability. In this case, agents focus more heavily on their teammate's behaviour than on the principal's offer and therefore, regardless of the level of team-based compensation, a large amount of free-riding occurs within the team. In contrast, when the team is homogeneous, agents are better able to use the contract offer as a coordination device among themselves and therefore achieve higher efficiency.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00179979.

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Date of creation: 2001
Date of revision:
Publication status: Published in Working Paper du GATE 2001-13. 2001
Handle: RePEc:hal:cesptp:halshs-00179979
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