Team Production with Punishment Option: Insights from a Real Effort Experiment.

Summary This paper analyzes the consequences of allowing for punishment in a real‐effort pair production experiment. The behavior of the best performer in the team differs on whether he or she can impose a sanction on the less performing partner. When sanctions are not allowed, good performers reduce their effort in response to the advantageous difference in scores. when they can impose sanctions, their change in effort is no longer related to the difference in scores. To some extent, a sanction mechanism allows good performers to focus on their own performance. In the case of costless sanctions, not sanctioning a partner who under‐performs, what we refer to as forgiveness, prompts the latter to improve his or her performance, but applying the sanction has a stronger push effect. Copyright © 2014 John Wiley & Sons, Ltd.