Discussion paper

DP4702 Joint Production in Teams

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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Citation

Battaglini, M (2004), ‘DP4702 Joint Production in Teams‘, CEPR Discussion Paper No. 4702. CEPR Press, Paris & London. https://cepr.org/publications/dp4702