Team incentives and performance: Evidence from a retail chain

Guido Friebel, Matthias Heinz, Miriam Krueger, Nick Zubanov, 2017,
American Economic Review, 107 (8), 2168-2203

In a field experiment with a retail chain (1,300 employees, 193 shops), randomly selected sales teams received a bonus. The bonus increases both sales and number of customers dealt with by 3 percent. Each dollar spent on the bonus generates $3.80 in sales, and $2.10 in profit. Wages increase by 2.2 percent while inequality rises only moderately. The analysis suggests effort complementarities to be important, and the effectiveness of peer pressure in overcoming free-riding to be limited. After rolling out the bonus treatment, and control shops’ performance converge, suggesting long-term stability of the treatment effect.