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Leadership and incentives

Author

Listed:
  • Cappelen, Alexander W.

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Reme, Bjørn-Atle

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Sørensen, Erik Ø.

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Tungodden, Bertil

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

We study whether compensating people who volunteer to be leaders in a public goods game creates a social crowding-out effect of moral motivation among the others in the group. We report from an experiment with four treatments, where the base treatment is a standard public goods game with simultaneous contribution decisions, while the three other treatments allowed participants to volunteer to be an “early contributor” in their group. In the three leader treatments, we manipulate the level of compensation given to the leader. Our main finding is that a moderate compensation to the leader is highly beneficial, it increases the average contribution by almost 80%. A high compensation, however, is detrimental to public good provision. We show that paying a moderate compensation to the leaders strikes the right balance between the need for recruiting leaders and avoiding a large social crowding-out effect. We argue that the main findings of the paper are important in many real life settings where we would like to use economic incentives to encourage people to lead by example.

Suggested Citation

  • Cappelen, Alexander W. & Reme, Bjørn-Atle & Sørensen, Erik Ø. & Tungodden, Bertil, 2013. "Leadership and incentives," Discussion Paper Series in Economics 10/2013, Norwegian School of Economics, Department of Economics.
  • Handle: RePEc:hhs:nhheco:2013_010
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Voluntariness; Group behavior; Public goods; Laoratory.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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