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.


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