Leadership and Incentives

Alexander Cappelen, Bjørn-Atle Reme (), Erik Sørensen and Bertil Tungodden
Additional contact information
Bjørn-Atle Reme: Competition Division, Telenor Research, 1331 Fornebu, Norway; and Department of Economics, NHH Norwegian School of Economics, 5045 Bergen, Norway

Management Science, 2016, vol. 62, issue 7, 1944-1953

Abstract: We study how leader compensation affects public goods provision. We report from a lab experiment with four treatments, where the base treatment was a standard public goods game with simultaneous contribution decisions, and the three other treatments allowed participants to volunteer to be the leader in their group and make their contribution before the others. In the three leader treatments, we manipulated the level of compensation given to the leader. Our main finding is that a moderate compensation to the leader is beneficial; it increases the average contribution relative to both a situation where the leader is not compensated and a situation without a leader. A further increase in the leader compensation, however, is detrimental to public goods provision; it attracts more free riders and creates a social crowding-out effect. Finally, we report from a survey showing that the social crowding-out effect is also present in the population at large. We argue that the main findings of the paper are important in many real-life settings where we would like to use economic incentives to encourage people to lead by example. This paper was accepted by Uri Gneezy, behavioral economics .

Keywords: behavior and behavioral decision making; public goods provision; compensation; leadership (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2015.2225 (application/pdf)

Related works:
Working Paper: Leadership and incentives (2014)
Working Paper: Leadership and incentives (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:62:y:2016:i:7:p:1944-1953

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().