Discussion Paper Details

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Title: Joint Production in Teams

Author(s): Marco Battaglini

Publication Date: October 2004

Keyword(s): incentives, moral hazard, teams and theory of the firm

Programme Area(s): Industrial Organization

Abstract: Consider Holmström.s moral hazard in teams problem when there are n agents, each agent i has a a(i)-dimensional strategy space and output can be m-dimensional. We show that a compensation mechanism that satisfies budget balance, limited liability and implements an efficient allocation generically exists if and only if Sum_a(i)/(n-1)< m. When this condition is satisfied, the optimal mechanism discourages collusive behavior and, under a weak condition, filters out inefficient equilibria.

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Bibliographic Reference

Battaglini, M. 2004. 'Joint Production in Teams'. London, Centre for Economic Policy Research.