Centralized vs. Decentralized Incentives in Teams: Experimental Evidence
Lebourges, Marc
Centralized vs. Decentralized Incentives in Teams: Experimental Evidence - 2025.
9
This paper presents evidence from a laboratory experiment comparing different incentive mechanisms for team work: centralized (target-based and team tournament) and decentralized (peer-pressure), or revenue sharing, which constitutes our baseline treatment. We observe free-riding in the baseline treatment, albeit not as severe as theoretically-predicted. Peer pressure partly limits free-riding but is costly for workers. Target-based schemes lead to near-Pareto levels of effort and high firms’ profits but provide relatively lower workers’ payoffs. Finally, team tournaments generate high efforts but also high payoff inequalities among workers. JEL Codes: J33, C92.
Centralized vs. Decentralized Incentives in Teams: Experimental Evidence - 2025.
9
This paper presents evidence from a laboratory experiment comparing different incentive mechanisms for team work: centralized (target-based and team tournament) and decentralized (peer-pressure), or revenue sharing, which constitutes our baseline treatment. We observe free-riding in the baseline treatment, albeit not as severe as theoretically-predicted. Peer pressure partly limits free-riding but is costly for workers. Target-based schemes lead to near-Pareto levels of effort and high firms’ profits but provide relatively lower workers’ payoffs. Finally, team tournaments generate high efforts but also high payoff inequalities among workers. JEL Codes: J33, C92.
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