Joint Production in Teams

33 Pages Posted: 29 Dec 2004

See all articles by Marco Battaglini

Marco Battaglini

Princeton University - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: October 2004

Abstract

Consider Holmstrom's moral hazard in teams problem when there are n agents, each agent i has an a(i)-dimensional strategy space and output can be m-dimensional. We show that a compensation mechanism that satisfies budget balance, limited liability and implements an efficient allocation generically exists if and only if Sum_a(i)/(n-1)< m. When this condition is satisfied, the optimal mechanism discourages collusive behavior and, under a weak condition, filters out inefficient equilibria.

Keywords: Teams, moral hazard, incentives, theory of the firm

JEL Classification: D23, D82, J33, L23

Suggested Citation

Battaglini, Marco, Joint Production in Teams (October 2004). CEPR Discussion Paper No. 4702. Available at SSRN: https://ssrn.com/abstract=641183

Marco Battaglini (Contact Author)

Princeton University - Department of Economics ( email )

213 Fisher Hall
Princeton, NJ 08544
United States
609-258-4002 (Phone)
609-258-6419 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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