incentives, outcomes management, team-based incentives, game theory
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A Game Theory Analysis of Team Based Incentivization in Retailing
The connection between incentives and outcomes has long found consistent support in management literature generally (Bartol and Hagmann 1992; Miller & Schuster 1993; Swinehart 1986) and retailing in particular (Banker et al. 1996; Team Pay Case Studies 1997). Later meta-studies strongly support this view. (Condly, Noe and Jackson 2002; Garbers and Konradt 2014). Yet, providing performance-based incentives, at least for rank and file retail employees, still is not common in U.S. retailing and team-based incentives are even rarer.
The next section of this manuscript describes some of the issues with individualized commissions, which though not prevalent in a many product domains, are still dominant in some (cars, furniture and real estate for example). Then, we use game theory to illustrate how employees of retailers using team-based incentives might outperform employees who received no performance incentives and or individualized incentives.