Hierarchy and Opportunism in Teams

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Abstract

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 revenuesharing 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.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages32
Volume2005-109
Publication statusPublished - 2005

Publication series

NameCentER Discussion Paper
Volume2005-109

Keywords

  • team production
  • leadership
  • opportunism
  • experiments

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    Potters, J. J. M., Sefton, M., & van der Heijden, E. C. M. (2005). Hierarchy and Opportunism in Teams. (CentER Discussion Paper; Vol. 2005-109). Microeconomics.