Cooperation or Competition? Social Identity and Incentives in Workgroups

Incentive theory has paid limited attention to workers’ identities. In this paper, we conduct experiments exploring the interaction between identity and incentives. We construct workgroups which are either homogeneous or heterogeneous in members' identities and examine their productivity under tournament pay, individual pay, or team pay wage schemes. We utilise a novel real-effort task where productivity depends on personal effort and peer help. Productivity is highest under individual pay in homogeneous workgroups, but similar across wage schemes in heterogeneous workgroups. Generally, incentives that are more cooperative induce greater helping of peers --- especially in homogeneous workgroups, while incentives that are more competitive induce higher personal effort --- especially in heterogeneous workgroups. However, complementarity between help and effort also moderates the interaction between identity and incentives. We also find that incentives influence workers' identities and that females underperform under individual and tournament pay