Economists typically depict humans as being inherently self-interested, meaning that we value an opportunity to serve our own individual interests more highly than a chance to help a team win. This is partly because of the concept of the “free rider”—the person who doesn’t pull his weight during a group project, but benefits from the effort other members contribute.
But a study—recently published in Management Science—that I completed with Hua Chen of the University of Mississippi contradicts this. While studying undergraduates playing a computer simulation, we found that our subjects exerted more effort in team-based contests than when they competed as individuals, and that guilt aversion—the fear of letting their teammates down—motivated them to work harder.
In our study, the students had the chance to earn up to $15 each, based on their performance at the end of 15 “decision rounds” in the computer simulation. Working either alone or in teams, they were asked to choose a number in each round. In a given decision round, whichever competitor (team or individual, depending on the rules of the contest in question) had the higher number was declared the winner and awarded points. Choosing a higher number increased the likelihood of winning a round, but also increased the amount of cash a participant stood to lose if he didn’t win (that is, if the opponent chose a number that was higher still). The students received cash at the end of the 15-round contest in accordance with their final point totals, with winning competitors, naturally, receiving higher amounts than losing competitors.
We found that the students working in two-person teams chose higher numbers than the students who competed alone. We also found that participants in the team-based contests picked higher numbers if they had previously socialized with their teammate (in this case, through a short conversation and solving a Sudoku puzzle together before playing the computer game), hinting that the social pressure against letting their teammates down influenced participants’ choices.
To delve deeper into the role of social pressure, we varied whether our subjects knew exactly how much their teammates had contributed in the contest. Each contestant’s contribution was a combination of a number chosen by the contestant and a number randomly generated by the computer. If these numbers were transparent, then contestants would know how much they and their teammates had contributed, and would be able to identify the party responsible for the team’s loss. Interestingly, in the experimental condition in which teammates’ contributions were not transparent, contestants chose lower numbers on average. This demonstrates the motivating power of guilt aversion: when players don’t fear being found out as the party that caused the team to lose, they choose lower numbers because they feel less guilty should the team lose.
We conducted this study in a decision-science laboratory, a simplified setting that eliminates factors that might skew the results. Out in the world, a sales contest that pits employees—or teams of employees—against one another might be affected by any number of factors (such as inherent differences in the employees’ sales territories, as an example). By removing potential confounding factors, we were able to observe our subjects’ basic tendency to take risks or avoid risks based on how badly they wanted to win. We believe these findings argue for wider use of team-based contests to motivate employees, especially contests in which participants can easily determine how much each team member is contributing.