Abstract:

Despite a large literature on team incentives, studies on teams in a purely financial sense are limited. In such environments, team members independently engage in tasks with identifiable individual contributions, while their compensation is partially linked to team outputs. We conducted an experiment of such scenario with three distribution schemes (equal sharing, individual piece rate, and winner-takes-all) and examined these schemes both with and without a team threshold. Our results showed the surprising power of equal sharing on improving team productivity compared to winner-takes-all and individual piece-rate, contradicting the predictions of the standard economics theory. Our findings reveal that the higher team output observed under equal sharing was driven by the increased productivity of less able workers. This could be attributed to an explanation of guilt aversion and cannot be illuminated by several alternative theories. We also found that participants preferred piece rate over the other schemes. Yet, the presence of a team threshold highlighted the importance of cooperation, leading to a greater preference for equal sharing. Our findings suggest that organizations with workers of varying abilities are likely to benefit from an appropriate equal sharing component tailored to their responsiveness to sharing in rewards.