Team Signaling and Collective Reputation with an Application to the Optimal Sharing Rule

24 Pages Posted: 30 Dec 2009

See all articles by Jinbo Li

Jinbo Li

Guanghua School of Management, Peking University

Huihua Nie

Renmin University of China - School of Economics

Ji Shen

London School of Economics & Political Science (LSE)

Date Written: December 29, 2009

Abstract

This paper extends the team production theory pioneered by Holmstrom (1982) with a team signaling model. In the model, the team's output acts as a signal of the team's ability, and thus is valuable for the team members. The team members will cooperate to some extent to signal a speciĀ…fic type, which alleviate the shirking problem. The enforcement mechanism is revealed: the rent from the signaling is to subsidize the team production, which in effect transforms the prisoners' dilemma game into a coordination game which is shaped by the sharing rule. The optimal sharing rule is determined by the trade-off between reputational rents and incentive distortion.

Keywords: Team production, signaling, collective reputation

JEL Classification: D820, D860, L220

Suggested Citation

Li, Jinbo and Nie, Huihua and Shen, Ji, Team Signaling and Collective Reputation with an Application to the Optimal Sharing Rule (December 29, 2009). Available at SSRN: https://ssrn.com/abstract=1529531 or http://dx.doi.org/10.2139/ssrn.1529531

Jinbo Li (Contact Author)

Guanghua School of Management, Peking University ( email )

Beijing 100871, Beijing
China

Huihua Nie

Renmin University of China - School of Economics ( email )

59 Zhongguancun St., Haidian
School of Economics, RUC
Beijing, Beijing 100872
China

HOME PAGE: http://www.niehuihua.com

Ji Shen

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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