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Leadership and incentives

Cappelen, Alexander W.; Reme, Bjørn-Atle; Sørensen, Erik Ø.; Tungodden, Bertil
Working paper
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URI
http://hdl.handle.net/11250/163410
Date
2013-04
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  • Discussion papers (SAM) [674]
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.
Publisher
Norwegian School of Economics. Department of Economics
Series
Discussion paper;10/2013

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