Hierarchy and Opportunism in Teams
CentER Discussion Paper No. 2005-109
31 Pages Posted: 14 Nov 2005
Date Written: August 2005
We use experiments to compare two institutions for allocating the proceeds of team production. Under revenue-sharing, each team member receives an equal share of team output; under leader-determined shares, a team leader has the power to implement her own allocation. Both arrangements are vulnerable to opportunistic incentives: under revenue sharing team members have an incentive to free-ride, while under leader-determined shares leaders have an incentive to seize team output. We find that most leaders forego the temptation to appropriate team output and manage to curtail free-riding. As a result, compared to revenue-sharing, the presence of a team leader results in a significant improvement in team performance.
Keywords: team production, leadership, opportunism, experiments
JEL Classification: C9, D2, H4, J3, L2
Suggested Citation: Suggested Citation