The Economics of Shame in Work Groups: How Mutual Monitoring Can Decrease Cooperation in Teams

Abstract

Recent economic theory suggests that free riding under group piece‐rate incentive schemes can be alleviated by mutual monitroing and social sanctioning. This article challenges this assumption by showing that the presence of the price mechanism in mutual monitoring and sanctioning can decrease the motivation to cooperate for certain types of agents: because the social rewards for cooperation that may develop through work are potentially based in a desire for pecuniary gain, withholding approval may matter less to initially cooperative agents. Hence, mutual monitoring can decrease cooperation in teams. The author presents evidence from social psychology illuminating differences between indiividualistic and cooperative types, discusses implications for work group design and future research, and presents a short mathematical model.