Massachusetts Institute of Technology (MIT) - Sloan School of Management
Yale University - Cowles Foundation
November 30, 2009
Cowles Foundation Discussion Paper No. 1695
This paper examines moral hazard in teams over time. Agents are collectively engaged in an uncertain project, and their individual efforts are unobserved. Free-riding leads not only to a reduction in effort, but also to procrastination. The collaboration dwindles over time, but never ceases as long as the project has not succeeded. In fact, the delay until the project succeeds, if it ever does, increases with the number of agents. We show why deadlines, but not necessarily better monitoring, help to mitigate moral hazard.
Number of Pages in PDF File: 103
Keywords: Moral hazard, Teams, Experimentation, Collaboration, Public goods, Learning
JEL Classification: C72, C73, D83working papers series
Date posted: May 4, 2009 ; Last revised: December 2, 2009
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