Uncertainty-Driven Cooperation
Theoretical Economics 15 (2020), 1023–1058 https://econtheory.org/ojs/index.php/te/article/viewFile/20201023/27652/800
Posted: 18 Jul 2017 Last revised: 28 Jul 2020
Date Written: January 23, 2019
Abstract
We consider dynamic team production in the presence of uncertainty. Team members receive interim feedback that depends on both their current effort level and the project’s uncertain prospects. In this environment, each member can encourage the others by making them more optimistic about the project’s prospects. We study the extent to which this incentive counters the usual free-riding incentive. Restricting the agents’ access to feedback can increase their equilibrium effort levels by mitigating the ratchet effect. In this case, using joint performance measures can be beneficial even when individual measures are available.
Keywords: Team production, free-riding, uncertainty, learning.
JEL Classification: C72, C73, D83
Suggested Citation: Suggested Citation
