Teamwork as a Self-Disciplining Device
50 Pages Posted: 29 Nov 2014 Last revised: 22 Jul 2017
Date Written: July 13, 2017
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: Suggested Citation