Profit Sharing and Peer Reporting

37 Pages Posted: 1 Jun 2016

See all articles by Jeffrey P. Carpenter

Jeffrey P. Carpenter

Middlebury College - Department of Economics; IZA Institute of Labor Economics

Andrea Robbett

Middlebury College - Department of Economics

Prottoy Akbar

University of Pittsburgh

Abstract

Despite the "1/N problem" associated with profit sharing, the empirical literature finds that sharing profits with workers has a positive impact on work team and firm performance. We examine one possible resolution to this puzzle by observing that, although the incentive to work harder under profit sharing is weak, it might be sufficient to motivate workers to report each other for shirking, especially if the workers are reciprocally-minded. Our model provides the rationale for this conjecture and we discuss the results of an experiment that confirms that profit sharing is most effective when peer reporting is possible.

Keywords: team production, profit sharing, peer reporting, reciprocity, experiment

JEL Classification: C92, J30, D20, M52

Suggested Citation

Carpenter, Jeffrey P. and Robbett, Andrea and Akbar, Prottoy, Profit Sharing and Peer Reporting. IZA Discussion Paper No. 9946. Available at SSRN: https://ssrn.com/abstract=2786030

Jeffrey P. Carpenter (Contact Author)

Middlebury College - Department of Economics ( email )

Munroe Hall
Middlebury, VT 05753
United States
802-443-3241 (Phone)
802-443-2084 (Fax)

HOME PAGE: http://community.middlebury.edu/~jcarpent/index.ht

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Andrea Robbett

Middlebury College - Department of Economics ( email )

Warner Hall
Middlebury, VT 05753
United States

Prottoy Akbar

University of Pittsburgh

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

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