Firm-Wide Incentives and Mutual Monitoring at Continental Airlines

In February 1995 Continental Airlines introduced an incentive scheme that promised monthly bonuses to all 35,000 hourly employees if the company achieved a firm-wide performance goal. Conventional wisdom suggests that free riding will render such schemes ineffective. We study the impact of the Continental scheme by comparing the change in performance at airports where workers were eligible for the scheme and airports where they were not. A...