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Profit Sharing and Peer Reporting

Author

Listed:
  • Jeffrey Carpenter

    (Department of Economics, Middlebury College, Middlebury, Vermont 05753, Institute of Labor Economics (IZA), 53113 Bonn, Germany)

  • Andrea Robbett

    (Department of Economics, Middlebury College, Middlebury, Vermont 05753)

  • Prottoy A. Akbar

    (Department of Economics, University of Pittsburgh, Pittsburgh, Pennsylvania 15260)

Abstract
Despite the “1/ N problem” associated with profit sharing, the empirical literature finds that sharing profits with workers has a positive impact on work team and firm performance. We examine one possible resolution to this puzzle by observing that, although the incentive to work harder under profit sharing is weak, it might be sufficient to motivate workers to report each other for shirking, especially if the workers are reciprocally minded. Our model provides the rationale for this conjecture, and we discuss the results of an experiment finding that workers who share in firm profits are more willing to provide accurate information about their peers to management and that profit sharing is most effective when peer reporting is possible.

Suggested Citation

  • Jeffrey Carpenter & Andrea Robbett & Prottoy A. Akbar, 2018. "Profit Sharing and Peer Reporting," Management Science, INFORMS, vol. 64(9), pages 4261-4276, September.
    • Handle: RePEc:inm:ormnsc:v:64:y:2018:i:9:p:4261-4276
    DOI: 10.1287/mnsc.2017.2831
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    9. Gilberto Tadeu Lima & Jaylson Jair Silveira, 2021. "Evolutionary microdynamics of employee profit sharing as productivity-enhancing device," Journal of Evolutionary Economics, Springer, vol. 31(2), pages 417-449, April.
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    More about this item

    Keywords

    team production; profit sharing; peer reporting; reciprocity; experiment;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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