Hierarchy and Opportunism in Teams

CentER Discussion Paper No. 2005-109

31 Pages Posted: 14 Nov 2005

See all articles by Johannes (Jan) J. M. Potters

Johannes (Jan) J. M. Potters

Tilburg University - CentER

Eline van der Heijden

Tilburg University, CentER

Martin Sefton

University of Nottingham - School of Economics

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

Potters, Johannes (Jan) J. M. and van der Heijden, Eline and Sefton, Martin, Hierarchy and Opportunism in Teams (August 2005). CentER Discussion Paper No. 2005-109, Available at SSRN: https://ssrn.com/abstract=814645 or http://dx.doi.org/10.2139/ssrn.814645

Johannes (Jan) J. M. Potters (Contact Author)

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
+31 13 466 8204 (Phone)
+31 13 466 3042 (Fax)

Eline Van der Heijden

Tilburg University, CentER ( email )

P.O. Box 90153
Department of Economics
5000 LE Tilburg

Martin Sefton

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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