Adding Tournament to Tournament: The Interactive Effect of Team and Individual Incentives
This study experimentally investigates the interactive effect of individual and team incentive systems on effort. Using economic and social identity theories, I examine whether both free-riding and collusion problems can be simultaneously mitigated when a combination of individual and team incentive systems are used. Consistent with the extended Nitzan's (1991) nested contest economic model and social identity theory (SIT), I find that when a between-team tournament exists, individuals are likely to exert greater effort, compared to when there is no such tournament. However, inconsistent with the joint maximization Nash equilibrium predictions from the model, I find that a within-team tournament has a positive effect on individuals' effort, as suggested by SIT. Further, the results show that in comparison, individuals facing both between-team and within-team competition are motivated to exert the greatest effort mitigating both free-riding and collusion problems.
Business, Business Administration, Management, and Operations, collusion, free riding, individual incentive, team incentive, tournament
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