Free Riding, Democracy and Sacrifice in the Workplace : Evidence from a Real Effort Experiment

Teams are increasingly popular decision-making and work units in firms. This paper uses a novel real effort experiment to show that (a) some teams in the workplace reduce their members’ private benefits to achieve a group optimum in a social dilemma and (b) such endogenous choices by themselves enhance their work productivity (per work time production) – a phenomenon called the “dividend of democracy.” In the experiment, worker subjects are randomly assigned to a team of three, and they then jointly solve a collaborative real effort task under a revenue-sharing rule in their group with two other teams, while each individual worker can privately and independently shirk by playing a Tetris game. Strikingly, teams exhibit significantly higher productivity (per-work-time production) when they can decide whether to reduce the return from shirking by voting than when the policy implementation is randomly decided from above, irrespective of the policy implementation outcome. This means that democratic culture directly affects behavior. On the other hand, the workers under democracy also increase their shirking, presumably due to enhanced fatigue owing to the stronger productivity. Despite this, democracy does not decrease overall production thanks to the enhanced work productivity