The Carrot vs . the Stick in Work Team Motivation

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 can increase efficiency (i.e., contributions) levels by 10-28%. We find that handicapped incentives promise the highest efficiency levels, and when handicapping is not used penalties may be more effective than prizes. The implications for work teams and suggestions for practical implementation are discussed. *The author is grateful to the Research Council at Colgate University for funding these experiments. This paper has benefited from conversations with R. Mark Isaac, the participants of the economics seminars at Colgate University (a joint seminar with Hamilton College) and Utah State University, the conference participants at the Economic Science Association Fall 1999 meetings in Grenoble, France, and from the comments of two anonymous referees.