Abstract
This paper introduces heterogeneity of team members’ preferences towards inequality of effort choices. While some prefer working more than their teammates (“worker-types”) others prefer working less (“shirker-types”). Extending Fehr and Schmidt (1999) we assume that these preferences are private knowledge and team members form expectations about teammates’ preferences. A simple theoretical model identifies the interplay of expected preferences and optimum effort choices in a Bayesian Nash equilibrium, its predictions are partly supported by data from a real-effort experiment. We find that expecting worker-type teammates can spur team performance, providing a strong argument for team building measures.
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