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  • Alessandro Bonatti
  • Johannes Horner
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    Abstract

    This paper examines moral hazard in teams over time. Agents are collectively engaged in a project whose duration and outcome are uncertain, and their individual efforts are unobserved. Free-riding leads not only to a reduction in effort, but also to procrastination. Collaboration among agents dwindles over time, but does not cease as long as the project has not succeeded. In addition, the delay until the project succeeds, if it ever does, increases with the number of agents. We show why deadlines, but not necessarily better monitoring, help to mitigate moral hazard. (JEL D81, D82, D83)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.2.632
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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 101 (2011)
    Issue (Month): 2 (April)
    Pages: 632-63

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    Handle: RePEc:aea:aecrev:v:101:y:2011:i:2:p:632-63

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    1. Ma, Ching-to & Moore, John & Turnbull, Stephen, 1988. "Stopping agents from "cheating"," Journal of Economic Theory, Elsevier, vol. 46(2), pages 355-372, December.
    2. Fershtman, C. & Nitzan, S., 1988. "Dynamic Voluntary Provision Of Public Goods," Papers 21-88, Tel Aviv.
    3. Dinah Rosenberg & Eilon Solan & Nicolas Vieille, 2007. "Social Learning in One-Arm Bandit Problems," Econometrica, Econometric Society, vol. 75(6), pages 1591-1611, November.
    4. Dirk Bergemann & Ulrigh Hege, 2005. "The Financing of Innovation: Learning and Stopping," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 719-752, Winter.
    5. Steven Tadelis & Jonathan Levin, 2004. "Profit Sharing and the Role of Professional Partnerships," 2004 Meeting Papers 156, Society for Economic Dynamics.
    6. Mason, Robin & Välimäki, Juuso, 2008. "Dynamic Moral Hazard and Project Completion," CEPR Discussion Papers 6857, C.E.P.R. Discussion Papers.
    7. Leslie M. Marx & Steven A. Matthews, . ""Dynamic Voluntary Contribution to a Public Project''," CARESS Working Papres 99-01, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    8. Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
    9. Gradstein, Mark, 1992. "Time Dynamics and Incomplete Information in the Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 581-97, June.
    10. Strausz, Roland, 1999. "Efficiency in Sequential Partnerships," Journal of Economic Theory, Elsevier, vol. 85(1), pages 140-156, March.
    11. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
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