Resource Inequality in Competition Between Teams

Abstract

Teams often suffer from a free rider problem with respect to individual contributions. That putting teams into competition with each other can mitigate this problem is an important recent insight. However, we know little about how inequality in endowment between and within teams might influence this beneficial effect from competition. We address this question with an experiment where teams contribute to a public good that then determines their chances of winning a Tullock contest with another team. We find a non-monotonic effect on team effort with both between and within team inequality. The boost to efforts from competition disappears when between-group inequality is high. This is mainly because the ‘rich’ ‘disengage’: they make no more contribution to a public good than they would when there is no competition. There is evidence that the ‘poor’ respond to moderate inequality ‘doggedly’, by expending more effort compared to competition with equality, but this ‘doggedness’ disappears too when inequality is high. With within group inequality, competition once again boosts team effort across the board. However, the boost is greatest when an equal group competes against an unequal group. This boost is driven by a dramatic increase in the efforts of the equal group. Equal groups do not experience such a boost when facing another equal group. Team effort in unequal groups, on the other hand, is unaffected by the presence or absence of inequality in the competing group.