Productivity Under Group Incentives: An Experimental Study

Abstract

This paper presents an experimental examination of a variety of group incentive programs. The authors 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. Their 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. Copyright 1997 by American Economic Association.