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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
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Handle: RePEc:not:notcdx:2006-15
Contact details of provider: Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
Phone: (44) 0115 951 5620
Fax: (0115) 951 4159
Web page: http://www.nottingham.ac.uk/economics/cedex/

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