Relative Rewards within Team-Based Compensation
38 Pages Posted: 26 Nov 2006
Date Written: November 2006
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: teamwork, bonus pools, relative rewards, motivation crowding out, voluntary cooperation, personnel economics, experiments
JEL Classification: C72, C91, H41, J33, L23, M52
Suggested Citation: Suggested Citation
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