Monitoring teamwork: how do punishment motivations change with group size

Teamwork monitoring and control is a crucial matter in firm management. While teamwork can attain higher efficiency than individual work given the potential synergies arising, free riding in effort-intensive tasks lead to underperformance of the team. In this work, we experimentally explore the performance of external monitoring in order to mitigate such underperformance. In particular, we contrast, for two different team sizes, two alternatives in the provision of incentives of the external monitors: a fixed salary and a salary subject to the performance of the team, i.e. with a bonus. With a fixed salary, if monitors punish low efforts, it must be purely due to an intrinsic motivation, as punishment implementation is costly. With a contingent salary, however, there can also be an extrinsic motivation to punish in order to increase performance and, subsequently, future payoffs. We find out that this extrinsic motivation has a significant impact when the group size increases. That is, when the team is sufficiently large, the monitor implements substantially more punishment with a bonus than without a bonus. However, aggressive punishment does not achieve an increase in effort exertion.