How Competition Controls Team Production: The Case of Fishing Firms

Economic Working Paper 261

39 Pages Posted: 27 May 1998

See all articles by Benito Arruñada

Benito Arruñada

Pompeu Fabra University - Department of Economics and Business; Barcelona GSE

Manuel González Díaz

Universidad de Oviedo - Facultad de Economicas

Abstract

Under team production, those who monitor individual productivity are usually the only ones compensated with a residual that varies with the performance of the team. This pattern is efficient, as is shown by the prevalence of conventional firms, except for small teams and when specialized monitoring is ineffective. Profit sharing in repeated team production induces all team members to take disciplinary action against underperformers through switching and separation decisions, however. Such action provides effective self-enforcement when the markets for team members are competitive, even for large teams using specialized monitoring. The traditional share system of fishing firms shows that for this competition to provide powerful enough incentives the costs of switching teams and measuring team productivity must be be low. Risk allocation may constrain the organizational design defined by the use of a share system. It does not account for its existence, however.

JEL Classification: J33, J41, L14, L20, Q22

Suggested Citation

Arruñada, Benito and González Díaz, Manuel, How Competition Controls Team Production: The Case of Fishing Firms. Economic Working Paper 261. Available at SSRN: https://ssrn.com/abstract=92730 or http://dx.doi.org/10.2139/ssrn.92730

Benito Arruñada (Contact Author)

Pompeu Fabra University - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Department of Economics and Business
Barcelona, 08005
Spain
+34 93 542 25 72 (Phone)
+34 93 542 17 46 (Fax)

HOME PAGE: http://www.econ.upf.edu/~arrunada

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Manuel González Díaz

Universidad de Oviedo - Facultad de Economicas ( email )

Campus del Cristo, s/n
Oviedo, Asturias 33071
Spain

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