Relative Rewards within Team-Based Compensation

Bernd Irlenbusch () and Gabriele K. Ruchala ()
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Bernd Irlenbusch: University of Cologne
Gabriele K. Ruchala: University College London

No 2423, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: How to design compensation schemes to motivate team members appears to be one of the most challenging problems in the economic analysis of labour provision. We shed light on this issue by experimentally investigating team-based compensations with and without bonuses awarded to the highest contributors in teams. A purely team-based compensation scheme induces agents to voluntarily cooperate while introducing an additional relative reward increases effort and efficiency only when the bonus is substantial. In this case, however, the data suggests that tournament competition crowds out voluntary cooperation within a team.

Keywords: relative rewards; motivation crowding out; voluntary cooperation; bonus pools; personnel economics; teamwork; experiments (search for similar items in EconPapers)
JEL-codes: C72 C91 H41 J33 L23 M52 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2006-11
New Economics Papers: this item is included in nep-bec, nep-cbe, nep-exp, nep-ppm and nep-soc
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Published - published in: Labour Economics, 2008, 15 (2), 141-167

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