Should Managers Use Team-Based Contests?

Hua Chen () and Noah Lim ()
Additional contact information
Hua Chen: School of Business Administration, University of Mississippi, University, Mississippi 38677
Noah Lim: Wisconsin School of Business, University of Wisconsin--Madison, Madison, Wisconsin 53706

Management Science, 2013, vol. 59, issue 12, 2823-2836

Abstract: When designing contests to motivate employees, should managers organize employees to compete in teams or as individuals? We develop a behavioral economics model that shows that if contestants are averse to being responsible for the team's loss, a team-based (TB) contest can yield higher effort than an individual-based (IB) contest. This prediction is contrary to those of standard economics models, which favor IB contests over TB contests. We test the competing predictions using laboratory economics experiments. The results show that when contestants do not know each other, average effort levels in the TB and IB contests are not different. When contestants are allowed to socialize with potential teammates before making effort decisions, TB contests yield higher effort relative to IB contests. We also show that the relative efficacy of TB contests is driven by contestants' aversion to letting their team down.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2013.1743 . This paper was accepted by Peter Wakker, decision analysis.

Keywords: group incentives; contests; behavioral economics; experimental economics (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (30)

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