From Team Spirit to Jealousy: The Pitfalls of Too Much Transparency

Alexander Koch and Albrecht Morgenstern ()
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Albrecht Morgenstern: Federal Ministry of Finance and IZA

No 05/08, Royal Holloway, University of London: Discussion Papers in Economics from Department of Economics, Royal Holloway University of London

Abstract: Free riding in team production arises because individual effort is not perfectly observable. It seems natural to suppose that greater transparency would enhance incentives. Therefore, it is puzzling that team production often lacks transparency about individual contributions despite negligible costs for providing such information. We offer a rationale for this by demonstrating that transparency can actually hurt incentives. In the presence of career concerns information on the quality of task execution improves incentives while sustaining a cooperative team spirit. In contrast, making the identity of individual contributors observable induces sabotage behavior that looks like jealousy but arises purely from signal jamming by less successful team members. Our results rationalize the conspicuous lack of transparency in team settings with strong career concerns (e.g., co-authorship, architecture, and patent applications) and contribute to explaining the popularity of group incentive schemes in firms.

Keywords: teams; reputation; transparency; group incentives; sabotage (search for similar items in EconPapers)
JEL-codes: D82 J30 L14 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005-07, Revised 2005-07
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Working Paper: From Team Spirit to Jealousy: The Pitfalls of Too Much Transparency (2005)
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