Relative rewards within team-based compensation |
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| Authors: | Bernd Irlenbusch Gabriele K. Ruchala |
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| Affiliation: | 1. ECARES, SBS-EM, Université libre de Bruxelles, 50 Avenue Roosevelt, Brussels 1050, Belgium;2. Central European University, 9 Nádor utca, Budapest 1051, Hungary;1. Department of Economics, Statistics and Finance, University of Calabria, Via Ponte Bucci, Arcavacata di Rende (CS), 87036, Italy;2. Institute for the Study of Labor (IZA), Bonn, Germany;3. School of Economics, University of Edinburgh, 30 Buccleuch Place, Edinburgh, EH8 9JT, United Kingdom;1. Erasmus University Rotterdam, The Netherlands;2. Tinbergen Institute, The Netherlands;3. CESifo, Germany;4. IZA, Germany;5. Maastricht University, The Netherlands;6. ERIM, The Netherlands |
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| 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. |
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