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Productivity Under Group Incentives: An Experimental Study

Haig R. Nalbantian and Andrew Schotter
The American Economic Review
Vol. 87, No. 3 (Jun., 1997), pp. 314-341
Stable URL: http://www.jstor.org/stable/2951348
Page Count: 28
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Productivity Under Group Incentives: An Experimental Study
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Abstract

This paper presents an experimental examination of a variety of group incentive programs. We investigate simple revenue sharing and more sophisticated, target-based systems such as profit sharing or productivity gainsharing, as well as tournament-based and monitoring schemes. Our results can be characterized by three facts: (1) history matters; how a group performs in one incentive scheme depends on its history together under the scheme that preceded it; (2) relative performance schemes outperform target-based schemes; and (3) monitoring can elicit high effort from workers, but the probability of monitoring must be high and, therefore, costly.

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