Document Type

Article

Journal/Book Title/Conference

Economics Research Institute Study Paper

Volume

6

Publisher

Utah State University Department of Economics

Publication Date

2000

First Page

1

Last Page

37

Abstract

This paper reports on the use of carrot (positive) and stick (negative) incentives as methods of increasing effort among members of work teams. We study teams of four members in a laboratory environment in which giving effort towards the team goal is simulated by eliciting voluntary contributions towards the provision of a public good. We test the efficiencyimproving properties of four distinct environments: monetary prizes given to high contributors versus monetary fines assessed to low contributors, where high/low contributor is defined first in terms of absolute contributions and then in terms of contributions relative to abilities-which we call handicapping. Our results show that both carrot and stick increase efficiency levels by 11-29%. We find that handicapped incentives promise the highest efficiency levels, and when handicapping is not used certain types of penalties may be more effective than prizes. The implications for work teams and suggestions for practical implementation are discussed.


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