Privacy and Team Incentives

80 Pages Posted: 28 Jun 2019 Last revised: 20 May 2024

See all articles by Andrea M Buffa

Andrea M Buffa

University of Colorado at Boulder - Leeds School of Business

Qing Liu

City University of Hong Kong (CityU)

Lucy White

Centre for Economic Policy Research (CEPR); Boston University - Department of Finance & Economics

Date Written: May 19, 2024

Abstract

Real world contracts are typically private, observed only by their direct signatories, so agents working together are vulnerable to the principal opportunistically reducing other agents' incentives. The principal can mitigate this commitment problem by giving the most skilled agent a budget and delegating authority to write other agents' contracts. This endogenous hierarchy, never optimal with public contracts, raises effort, output, and compensation, but allows rent extraction. The principal prefers it when contracts are opaque enough, skill is sufficiently heterogeneous across agents and joint output is sensitive enough to effort. Our model provides novel predictions for the structure of banking syndicates.

Keywords: Teams, delegation, private contracts, privacy, incentives, effort complementarity, externalities, banking syndicates, pay transparency, outsourcing, production networks

JEL Classification: D23, D86, G24, J33, L24, M52

Suggested Citation

Buffa, Andrea M and Liu, Qing and White, Lucy, Privacy and Team Incentives (May 19, 2024). Available at SSRN: https://ssrn.com/abstract= or http://dx.doi.org/10.2139/ssrn.3410479

Andrea M Buffa (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Qing Liu

City University of Hong Kong (CityU) ( email )

Hong Kong

Lucy White

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Boston University - Department of Finance & Economics ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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