Leadership and incentives
Working paper
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Date
2013-04Metadata
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- Discussion papers (SAM) [658]
Abstract
We study whether compensating people who volunteer to be leaders in a public
goods game creates a social crowding-out effect of moral motivation among
the others in the group. We report from an experiment with four treatments, where
the base treatment is a standard public goods game with simultaneous contribution
decisions, while the three other treatments allowed participants to volunteer
to be an “early contributor” in their group. In the three leader treatments, we
manipulate the level of compensation given to the leader. Our main finding is
that a moderate compensation to the leader is highly beneficial, it increases the
average contribution by almost 80%. A high compensation, however, is detrimental
to public good provision. We show that paying a moderate compensation
to the leaders strikes the right balance between the need for recruiting leaders
and avoiding a large social crowding-out effect. We argue that the main findings
of the paper are important in many real life settings where we would like to use
economic incentives to encourage people to lead by example.