Group incentives or individual incentives? A real-effort weak-link experiment

Bortolotti, Stefania; Devetag, Giovanna; Ortmann, Andreas

doi:10.1016/j.joep.2016.05.004

Cited by 11 publications

(16 citation statements)

References 49 publications

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“…We also see that the time trend is always statistically significant and positive for team production: team production is increasing over time for both treatments. Although this finding is unlike previous weak-link experiments with abstract effort, our result is in line with other real effort coordination experiments (Vranceanu et al 2015, Bortolotti et al 2016. We take a closer look at what goals managers set in the next section.…”

Section: Goal Setting Team Production Andsupporting

confidence: 90%

“…In fact, most of these experiments observe outcomes tending toward the least efficient equilibrium. However, recent coordination experiments (Vranceanu et al 2015, Bortolotti et al 2016 using real effort find the opposite: subjects' individual performance and coordination outcomes increase over time and approach the payoff-dominant equilibrium when one exists. As we show below, our results corroborate the findings from previous real effort coordination experiments, and we argue that the assumption of payoff dominance is reasonable in our setting.…”

Section: Coordination Game With a Goal-dependentmentioning

confidence: 96%

“…There are only a few real effort coordination experiments in the literature. The coordination experiment of Bortolotti et al (2016) consists of assigning subjects to teams and having them sort and count coins worth 1, 2, 5, and 10 euro cents within a time limit. The objective is to minimize the number of counting errors.…”

Section: Connection To the Literaturementioning

confidence: 99%

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Nonbinding Goals in Teams: A Real Effort Coordination Experiment

Fan

Gómez‐Miñambres

2020

M&SOM

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Problem definition: We investigate the impact of nonbinding (wage-irrelevant) goals, set by a manager, on a team of workers with “weak-link” production technology. Can nonbinding goals improve team production when team members face production complementarity? Academic/practical relevance: Nonbinding goals are easy to implement and ubiquitous in practice. These goals have been shown to improve individual performance, but it remains to be seen if such goals are effective in team production when there is production complementarity among workers. Methodology: We first develop a theoretical model where goals act as reference points for workers’ intrinsic motivation to complete the task. We then test our hypotheses in a controlled, human-subjects experiment. In our experiment, participants act as managers or workers, and we examine the impact of nonbinding goals on team outcomes. Results: Consistent with our model, we find evidence that team production does increase when managers are able to set goals. This effect is strongest when goals are challenging but attainable for weak-link workers. However, we also find evidence that many managers assign goals that are too challenging for weak-link workers, resulting in suboptimal team production, lower profits, and higher wasted performance (performance above the weak-link level). Managerial implications: Our analysis indicates that goals are effective motivators in teams, but some managers may have difficulty overcoming personal biases when setting goals. The task of setting team goals is more complex than setting individual goals, and many managers can benefit from training on how to set good goals for the team. Moreover, our finding that suboptimal goals also increase wasted performance suggests that improving goal-setting strategies is especially important in production settings where overperformance is costly for the firm (scrap, energy use, inventory costs, lower prices as a result of oversupply, etc.).

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Section: Goal Setting Team Production Andsupporting

confidence: 90%

Section: Coordination Game With a Goal-dependentmentioning

confidence: 96%

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Nonbinding Goals in Teams: A Real Effort Coordination Experiment

Fan

Gómez‐Miñambres

2020

M&SOM

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“…In this sense, effort is "chosen" and not real. As also discussed, Bortolotti et al (2013) implemented a testbed specifically designed to test coordination problems with real effort as opposed to the traditional lab experiments using chosen effort. The results indicate that outcomes may be sensitive to this specific implementation detail, and that coordination problems in the real world may be far less widespread than is currently thought.…”

Section: Assessmentmentioning

confidence: 99%

Solving Coordination Problems Experimentally

Devetag

Ortmann

2014

Laboratory Experiments in the Social Sciences

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“…There are some empirical studies that compare the effects of different payment schemes under complementarities. They compare individual incentives with equal profit sharing and consider teams with identical tasks for team members and pooled interdependence, as in van Dijk et al ( 2001), Hamilton et al (2003), or Bortolotti et al (2016). Goerg et al (2010) conduct an experiment to test the theory model of Winter (2004) which shows that asymmetric compensation can be part of an optimal mechanism even when agents are identical, based on the externalities of effort.…”

Section: Introductionmentioning

confidence: 99%

Equal and unequal profit sharing in highly interdependent work groups: A laboratory experiment

Angelovski¹,

Brandts

Solá

2021

Journal of Economic Behavior & Organization

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We study the performance effects of two profit sharing schemes in a simplified representation of an organization with high task interdependence. The production process involves three stages such that output of earlier stages is the necessary input for subsequent stages. Work at earlier stages is easier than at later stages and the product is only final if it goes successfully through the highest stage. We compare the effects on the performance of the organization of a payment scheme in which profits are equally shared by all those involved in the production process with one where the participation in profits is strongly increasing in the production stage. The comparison is made for two ways of assigning individuals to the production stage: randomly or by merit. We also study the distinction between sharing schemes that are exogenously imposed and those that are chosen by the person at the top of the hierarchy. We find that overall the type of payment scheme has no effect on profits. We also find that profits increase over time and more so with the equal than with the unequal sharing scheme. The high interdependence in production that we study makes steep incentives ineffective and even counter-productive. These changes in profits over time can be explained by changes in production performance over time. We also find that merit-based assignment to positions in the hierarchy leads to significantly higher profits than random assignment.

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Group incentives or individual incentives? A real-effort weak-link experiment

Cited by 11 publications

References 49 publications

Nonbinding Goals in Teams: A Real Effort Coordination Experiment

Nonbinding Goals in Teams: A Real Effort Coordination Experiment

Solving Coordination Problems Experimentally

Equal and unequal profit sharing in highly interdependent work groups: A laboratory experiment

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