Leadership and Incentives

48 Pages Posted: 18 Apr 2013

See all articles by Alexander W. Cappelen

Alexander W. Cappelen

Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Bjorn-Atle Reme

Norwegian School of Economics (NHH)

Erik Sorensen

Norwegian School of Economics (NHH) - Department of Economics

Bertil Tungodden

Norwegian School of Economics (NHH) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 12, 2013

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.

Suggested Citation

Cappelen, Alexander W. and Reme, Bjorn-Atle and Sorensen, Erik and Tungodden, Bertil, Leadership and Incentives (April 12, 2013). NHH Dept. of Economics Discussion Paper No. 10/2013, Available at SSRN: https://ssrn.com/abstract=2253246 or http://dx.doi.org/10.2139/ssrn.2253246

Alexander W. Cappelen

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Bjorn-Atle Reme

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

Erik Sorensen

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway

Bertil Tungodden (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

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