DP4702 Joint Production in Teams
|Publication Date:||October 2004|
|Keyword(s):||incentives, moral hazard, teams, theory of the firm|
|JEL(s):||D23, D82, J33, L23|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=4702|
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.