Teamwork as a Self-Disciplining Device

50 Pages Posted: 29 Nov 2014 Last revised: 22 Jul 2017

See all articles by Matthias Fahn

Matthias Fahn

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Hendrik Hakenes

Finance Group; Centre for Economic Policy Research (CEPR)

Date Written: July 13, 2017

Abstract

We show that team formation can serve as an implicit commitment device to overcome problems of self-control. If individuals have present-biased preferences, effort that is costly today but rewarded at some later point in time is too low from the perspective of an individual's long-run self. If agents interact repeatedly and can monitor each other, a relational contract involving teamwork can help to improve performance. The mutual promise to work harder is credible because the team breaks up after an agent has not kept this promise -- which leads to individual underproduction in the future and hence a reduction of future utility.

Keywords: Self-Control Problems, Teamwork, Relational Contracts

JEL Classification: L22, L23

Suggested Citation

Fahn, Matthias and Hakenes, Hendrik, Teamwork as a Self-Disciplining Device (July 13, 2017). Available at SSRN: https://ssrn.com/abstract=2531687 or http://dx.doi.org/10.2139/ssrn.2531687

Matthias Fahn

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Hendrik Hakenes (Contact Author)

Finance Group ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
+49-228-73-9225 (Phone)

HOME PAGE: http://www.finance.uni-bonn.de/hakenes

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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