This paper analyses the design of optimal incentives in teams both with and without rational altruism. The main contribution of the paper is to study the influence of the incentive function on the altruism parameter chosen by team members. We find that optimal incentive is independent of the presence of rational altruism. Secondly, we compare the welfare loss of equal sharing rules versus second best optimal sharing rules (based on equity). Finally, we distinguish between two sources of rational altruism: 1) the strategic component, and 2) an additional component that reflects wicked behavior by some agents, reducing the firm’s efficiency.
free text keywords: Rational Altruism, incentives in teams, equity based pay system, wicked masked altruism, jel:D64, jel:M21, jel:D23