Combining Egalitarian and Proportional Sharing Rules in Team Tournaments to Incentivize Energy-Efficient Behavior in a Principal-Agent Context

Abstract

Triggering the energy-efficient behavior of agents in firms simultaneously decreases costs and mitigates CO₂ emissions. If firms use team tournaments to increase energy-efficient behavior and thus employee performance, they may face unintended consequences, like a bifurcation effect: Individuals drop out if they believe that they cannot win the contest. By contrast, high-performing employees may overexert themselves. Additionally, some individuals might be tempted to free-ride. In a field experiment with truck drivers, we analyze whether proportional sharing of the bonus within teams based on individual effort instead of egalitarian sharing reduces both bifurcation and free-riding during team tournaments. Our results reveal that (1) the team contest improves performance; (2) this increase in performance is overall slightly stronger under the proportional than under the egalitarian sharing rule, using ceteris paribus comparisons; and (3) the performance increase is mainly driven by the team member performing worse.

Keywords

environmental performance business strategy and the environment environmental and natural resource economics greening business functions field experiments environmental attitudes and behavior

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