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Letting Down the Team? Social Effects of Team Incentives

  • Author(s): Babcock, Philip
  • Bedard, Kelly
  • Charness, Gary
  • Hartman, John
  • Royer, Heather
  • et al.
Abstract

This paper estimates social effects of incentivizing people in teams. In two fieldexperiments featuring exogenous team formation and opportunities for repeated socialinteractions, we find large team effects that operate through social channels. The teamcompensation system induced agents to choose effort as if they valued a marginal dollar ofcompensation for their teammate from two-thirds as much (in one study) to twice as much asthey valued a dollar of their own compensation (in the other study). We conclude that socialeffects of monetary team incentives exist and can induce effort at lower cost than through directindividual payment.

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