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Does Team-Based Compensation Give Rise to Problems When Agents Vary in Their Ability?

Published online by Cambridge University Press:  14 March 2025

Claude Meidinger,
Jean-Louis Rullière and
Marie-Claire Villeval
Claude Meidinger*
Affiliation:
TEAM, CNRS and University Paris I-Panthéon Sorbonne, 106-112 Boulevard de l'Hôpital, 75013 Paris, France
Jean-Louis Rullière*
Affiliation:
GATE, CNRS and University Lumière Lyon 2, 93 chemin des Mouilles, 69130 Ecully, France
Marie-Claire Villeval*
Affiliation:
GATE, CNRS and University Lumière Lyon 2, 93 chemin des Mouilles, 69130 Ecully, France
*
email: meiding@univ-paris1.fr
email: rulliere@gate.cnrs.fr
email: villeval@gate.cnrs.fr
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Abstract

This paper reports the results of an experiment on how team heterogeneity in terms of productivity influences both the revenue sharing proposed by the principal to the team and the employees’ performance. Experimental evidence shows that when the team is heterogeneous, the principal does not try to motivate the agents through her sharing offer. Regardless of the level of team-based compensation, a large amount of free riding occurs since each agent is mainly influenced by his teammate's behavior. In contrast, when the team is homogeneous, agents are better able to cooperate, reciprocating the principal's offer.

Keywords

experimentsfree ridingcompensationpeer pressureteamwork

JEL classification

D63: Equity, Justice, Inequality, and Other Normative Criteria and MeasurementC91: Laboratory, Individual BehaviorJ33: Compensation Packages • Payment MethodsC92: Laboratory, Group Behavior

Information

Type
Research Article
Information
Experimental Economics , Volume 6 , Issue 3 , November 2003, pp. 253 - 272
Copyright
Copyright © 2003 Economic Science Association

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