Groves, Theodore. "Incentives in Teams," Econometrica 41 (1973), pp, 617-631.
Analyzes the problem of inducing the members of an organization to select efficient effort levels. The author derives a particular set of compensation rules that elicit efficient effort, now known as a Groves mechanism. The optimal group piece rate in Section 24.4 of the text is an example of such a mechanism.
Holmstrom, Bengt. 1982. "Moral Hazard in Teams", Bell Journal of Economics 13(2) pp. 324-340.
Theoretically models moral hazard in teams, focusing on two features of teams: free riding and competition. Among other results, Holmstrom proves Result 24.4 in the text: Any group pay scheme that satisfies strong budget balancing leads to free riding. Thus, at least in theory, budget-breaking is key to eliciting efficient effort levels.
Gneezy, Uri, Ernan Haruvy and Hadas Yafe. (2004) “The Inefficiency of Splitting the Bill”, The Economic Journal 114 (495), pp. 265–280.
Experimentally studies whether free riding occurs when agents split the bill in a restaurant. Finds that subjects order more expensive food when the cost is split, resulting in a substantial loss of efficiency compared to paying individually.
Burgess, S., Propper, C., Ratto, M., Kessler Scholder, S. v. H., and Tominey, E, (2010). "Smarter task assignment or greater effort? The impact of incentives on team performance," Economic Journal 120(547):968–989.
Uses an experiment to study the impact of team‐based incentives, exploiting rich data from personnel records and management information systems. Using a triple difference design, shows that the incentive scheme had an impact on team performance, even with quite large teams. The provision of financial incentives did raise individual performance but that managers also disproportionately reallocated efficient workers to the incentivized tasks.
Yang Chun-Lei., Boyu Zhang, Gary Charness, Cong Li, and Jaimie W. Lien, (2018). “Endogenous rewards promote cooperation,” PNAS, 115 (40) 9968-9973.
Proposes an endogenous reward mechanism that taxes the gross income in each round of a public goods game, and assigns the amount to a fund. Each player then decides how to distribute his or her share of the fund as rewards to other members of the community. Simulations based on type-specific estimations indicate that the payoff-based conditional cooperation model explains the observed treatment effects well.
Friebel, Guido, Matthias Heinz, Miriam Krüger, and Nick Zubanov,"Team Incentives and Performance: Evidence from a Retail Chain" American Economic Review, 107 (8), 2018: 2168-2203.
In a field experiment with a retail chain (1,300 employees, 193 shops), randomly selected sales teams received a bonus. The bonus increases both sales and number of customers dealt with by 3 percent. Each dollar spent on the bonus generates $3.80 in sales and $2.10 in profit. This is a ‘success story’ for team bonuses.
Barron, Daniel and Yingni Guo 2020 The Use and Misuse of Coordinated Punishments The Quarterly Journal of Economics Volume 136, Issue 1, February 2021, Pages 471–504
This paper studies a potential problem with using group punishment of ‘free riders’ to discipline agents. When agents don’t see the efforts of all the team members, shirking agents can falsely accuse others of shirking, to prevent being reported themselves. The problem is illustrated by a recent FBI investigation of AirBnB host who extorted customers in this way.
Jacobs, Joshua A., Aaron M. Kolb and Curtis R. Taylor (2021) Communities, Co-ops, and Clubs: Social Capital and Incentives in Large Collective Organizations American Economic Journal: Microeconomics, 13(3): 29–69
The authors study how voluntary organizations can incentivize their members without monetary rewards. They imagine an organization in which each member's output is an imperfect signal of his underlying effort, and each member's utility from remaining in the organization depends on the other members’ efforts. Incentives can be provided only through two channels: expulsion following poor performance and the reward of a ‘rest’ period respite following good performance. The authors show that fully efficient effort by all members can be implemented by linking these punishments and rewards to a performance-tracking reputation system.