Diversity in Teams

Abstract

From corporate boards to innovative teams, the benefits of diversity are increasingly being praised. In this paper, we investigate how optimal cognitive diversity depends on the nature of production and the objective criterion employed. With a utilitarian objective, when the output of the most productive worker becomes relatively more important, optimal diversity weakly increases. To capture the preferences of a public service provider, a regulated firm or a very risk averse manager, we also consider a Rawlsian objective. While optimal diversity under the Rawlsian objective might decrease as the output of the most productive worker becomes relatively more important, optimal diversity is always weakly higher with the Rawlsian objective than with the utilitarian one. Our result suggests that a diverse outcome can be achieved by adjusting a team's objective rather than controlling diversity directly.

Keywords: cognitive diversity, submodular, supermodular, teams, utilitarian, Rawlsian objective

JEL Classification: L23, M14