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Risk-sorting and preference for team piece rates

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  • Agnes Baeker

    (Institute for Labour Law and Industrial Relations in the EU, University of Trier)

  • Vanessa Mertins

Abstract

Incentive schemes not only influence the effort provision of workers, but might also induce sorting. As drivers of self-selection, the literature mainly focuses on measures of productivity; however, other variables, such as preferences, beliefs and personality, also play a role. With this paper, we contribute to the literature on drivers of self-selection by analyzing the role of perceived wage risks as potential influences on the sorting decision. To this end, we study a sorting decision between two variable compensation systems, where both options carry wage risks. Specifically, we look at sorting between individual piece rates and team piece rates. Using experimental data, we find evidence for both risk diversification considerations and free-riding concerns (i.e., risk of teaming-up with low-productive teammates) as drivers of self-selection. However, our data does not support the concern of our experimental subjects that others actually reduce their effort when working under team compensation, as compared to individual-based compensation.

Suggested Citation

  • Agnes Baeker & Vanessa Mertins, 2012. "Risk-sorting and preference for team piece rates," IAAEU Discussion Papers 201208, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  • Handle: RePEc:iaa:dpaper:201208
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    References listed on IDEAS

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    Cited by:

    1. Cooper, David J. & Saral, Krista & Villeval, Marie Claire, 2019. "Why Join a Team?," IZA Discussion Papers 12587, Institute of Labor Economics (IZA).
      • David J. Cooper & Krista Saral & Marie Claire Villeval, 2021. "Why Join a Team?," Post-Print halshs-03003653, HAL.
      • David Cooper & Krista Saral & Marie Claire Villeval, 2019. "Why Join a Team?," Working Papers halshs-02295921, HAL.
      • David J. Cooper & Krista Saral & Marie Claire Villeval, 2019. "Why Join a Team?," Working Papers 1928, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    2. Vanessa Mertins & Wolfgang Hoffeld, 2015. "Do Overconfident Workers Cooperate Less? The Relationship Between Overconfidence and Cooperation in Team Production," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 36(4), pages 265-274, June.
    3. Bernard, Mark & Dohmen, Thomas & Non, Arjan & Rohde, Ingrid M.T., 2019. "Menus of contracts determine sorting patterns," Journal of Economic Psychology, Elsevier, vol. 72(C), pages 293-311.

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    More about this item

    Keywords

    Risk perception; Sorting; Preferred rewards; Productivity;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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