Experimental Economics and Employee Ownership

Philip Mellizo, an assistant professor at the College of Wooster, performed a game theory experiment to explore the impact of ownership incentives on job performance in a tightly controlled experimental setting. He created three-person teams to perform simulated work, where different formulas would determine the compensation of different groups. Some groups simulated a non-employee ownership company, some represented ownership of a minority of the company's share, and a third set of groups was intended to simulate the incentive that would exist in a company 100% owned by its workforce. Despite the artificial settings, Mellizo's results are similar to the anecdotal results from many actual employee ownership companies: there was little difference among the groups in round 1 or round 2, but in round 3, both of the employee ownership groups showed a statistically significant advantage over the flat-pay group.