We examine theoretically and experimentally how combining between-team and within-team incentives affects behavior in team tournaments. Theory predicts that free-riding will occur when there are only between-team incentives, and offering within-team incentives may solve this problem. However, if individuals collude, then within-team incentives may not be as effective at reducing free-riding. Consistent with the theoretical predictions, the results of our experiment indicate that although between-team incentives are effective at increasing individual effort, there is substantial free-riding and declining effort over time. Importantly, a combination of between-team and within-team incentives is effective not only at generating effort but also at sustaining effort over time, mitigating free-riding problem, increasing cooperation and decreasing collusion within teams.
Majerczyk, M., Sheremeta, R., & Tian, Y. (2019). Adding tournament to tournament: Combining between-team and within-team incentives. ESI Working Paper 19-20. Retrieved from https://digitalcommons.chapman.edu/esi_working_papers/279/