Team Incentives and Lower Ability Workers: A Real-Effort Experiment

Richard Freeman, Xiaofei Pan, Xiaolan Yang and Maoliang Ye

No 30427, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite a large literature on team incentives, studies on teams in a purely financial sense are limited. In such environments, team members independently engage in tasks with identifiable individual contributions, while their compensation is partially linked to team outputs. We con-ducted an experiment of such scenario with three distribution schemes (equal sharing, individ-ual piece rate, and winner-takes-all) and examined these schemes both with and without a team threshold. Our results showed the surprising power of equal sharing on improving team produc-tivity compared to winner-takes-all and individual piece-rate, contradicting the predictions of the standard economics theory. Our findings reveal that the higher team output observed under equal sharing was driven by the increased productivity of less able workers. This could be at-tributed to an explanation of guilt aversion and cannot be illuminated by several alternative theories. We also found that participants preferred piece rate over the other schemes. Yet, the presence of a team threshold highlighted the importance of cooperation, leading to a greater preference for equal sharing. Our findings suggest that organizations with workers of varying abilities are likely to benefit from an appropriate equal sharing component tailored to their re-sponsiveness to sharing in rewards.

JEL-codes: C91 C92 D23 J33 (search for similar items in EconPapers)
Date: 2022-09
New Economics Papers: this item is included in nep-dcm, nep-exp, nep-hrm and nep-lma
Note: IO LS PR
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Published as accepted at Journal of Economic Behavior and Organization

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