Delay and Deadlines: Freeriding and Information Revelation in Partnerships

American Economic Journal: Microeconomics, Vol. 6, No. 2, pp. 163-204, May 2014.

65 Pages Posted: 7 Aug 2011 Last revised: 19 Aug 2015

Arthur Campbell

Yale University, School of Management

Florian Ederer

Yale University - School of Management; Yale University - Cowles Foundation

Johannes Spinnewijn

London School of Economics & Political Science (LSE)

Date Written: April 24, 2013

Abstract

We analyze the interaction between the incentives for free-riding and information revelation among partners in a dynamic setting. Partners contribute to the value of a common project, but have private information about the success of their own contribution efforts. The desire to maintain a partner's motivation to exert effort leads to a reluctance to share information which in turn affects the incentives to exert effort. Both free-riding and the lack of information revelation inefficiently delay project implementation. When the deadline for project implementation is far away, unsuccessful partners freeride on each other's efforts. When the deadline draws close, successful partners stop revealing their success in an attempt to incentivize other group members to continue to exert effort. Surprisingly, setting a tighter deadline may increase the expected time until the project is implemented, but may also increase the expected value of the project. We show that there is a unique finite optimal deadline that maximizes beneficial productive efforts while avoiding unnecessary delays. As long as the deadline is set optimally, welfare is higher when information is only privately observable rather than revealed to the entire partnership.

Keywords: information search, information disclosure, group decisions, deadlines

JEL Classification: D71, D82, D83, H42

Suggested Citation

Campbell, Arthur and Ederer, Florian and Spinnewijn, Johannes, Delay and Deadlines: Freeriding and Information Revelation in Partnerships (April 24, 2013). American Economic Journal: Microeconomics, Vol. 6, No. 2, pp. 163-204, May 2014.. Available at SSRN: https://ssrn.com/abstract=1906040 or http://dx.doi.org/10.2139/ssrn.1906040

Arthur Campbell

Yale University, School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Florian Ederer (Contact Author)

Yale University - School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States

HOME PAGE: http://faculty.som.yale.edu/florianederer/

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Johannes Spinnewijn

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

Houghton Street
London, WC2A 2AE
United Kingdom
00 44 (0) 20 7955 7022 (Phone)

HOME PAGE: http://econ.lse.ac.uk/staff/spinnewijn_johannes/

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