IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v53y2022i3p484-515.html
   My bibliography  Save this article

The optimal assortativity of teams inside the firm

Author

Listed:
  • Ashwin Kambhampati
  • Carlos Segura‐Rodriguez

Abstract

How does a profit‐maximizing manager form teams and compensate workers when workers have private information about their productivity and exert hidden effort once in a team? We study a team‐production model in which positive assortative matching is both efficient and profit‐maximizing under pure adverse selection and pure moral hazard. We show that the interaction of adverse selection and moral hazard can lead to nonassortative matching if complementarities are sufficiently weak. When this is the case, the manager may prefer to delegate matching, allowing workers to sort themselves into teams.

Suggested Citation

  • Ashwin Kambhampati & Carlos Segura‐Rodriguez, 2022. "The optimal assortativity of teams inside the firm," RAND Journal of Economics, RAND Corporation, vol. 53(3), pages 484-515, September.
    • Handle: RePEc:bla:randje:v:53:y:2022:i:3:p:484-515
    DOI: 10.1111/1756-2171.12419
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1756-2171.12419
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1756-2171.12419?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 367-390, June.
    2. Serfes, Konstantinos, 2005. "Risk sharing vs. incentives: Contract design under two-sided heterogeneity," Economics Letters, Elsevier, vol. 88(3), pages 343-349, September.
    3. Alfred Galichon, 2016. "Optimal Transport Methods in Economics," Economics Books, Princeton University Press, edition 1, number 10870.
    4. Michel Poitevin, 2000. "Can the theory of incentives explain decentralization?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(4), pages 878-906, November.
    5. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    6. Lones Smith, 2006. "The Marriage Model with Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1124-1146, December.
    7. Franco, April Mitchell & Mitchell, Matthew & Vereshchagina, Galina, 2011. "Incentives and the structure of teams," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2307-2332.
    8. Wouter Dessein, 2002. "Authority and Communication in Organizations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 811-838.
    9. Alfred Galichon, 2016. "Optimal transport methods in economics," SciencePo Working papers Main hal-03256830, HAL.
    10. Sappington, David, 1984. "Incentive contracting with asymmetric and imperfect precontractual knowledge," Journal of Economic Theory, Elsevier, vol. 34(1), pages 52-70, October.
    11. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 243-263, February.
    12. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June.
    13. Alfred Galichon, 2016. "Optimal transport methods in economics," SciencePo Working papers hal-03256830, HAL.
    14. Johnson, T.R., 2013. "Matching through position auctions," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1700-1713.
    15. Jan Eeckhout & Philipp Kircher, 2010. "Sorting and Decentralized Price Competition," Econometrica, Econometric Society, vol. 78(2), pages 539-574, March.
    16. Ayca Kaya & Galina Vereshchagina, 2014. "Partnerships versus Corporations: Moral Hazard, Sorting, and Ownership Structure," American Economic Review, American Economic Association, vol. 104(1), pages 291-307, January.
    17. McAfee, R Preston & McMillan, John, 1991. "Optimal Contracts for Teams," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 561-577, August.
    18. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
    19. Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
    20. POITEVIN, Michel, 2000. "Innis Lecture: Can the Theory of Incentives Explain Decentralization?," Cahiers de recherche 2000-13, Universite de Montreal, Departement de sciences economiques.
    21. Alfred Galichon, 2016. "Optimal transport methods in economics," Post-Print hal-03256830, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ashwin Kambhampati & Carlos Segura-Rodriguez, 2020. "The Optimal Assortativity of Teams Inside the Firm," PIER Working Paper Archive 20-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    2. Nana Adrian & Marc Möller, 2020. "Self‐managed work teams: An efficiency‐rationale for pay compression," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(2), pages 315-334, April.
    3. D. Paul Newman & Kirill E. Novoselov, 2009. "Delegation to Encourage Communication of Problems," Journal of Accounting Research, Wiley Blackwell, vol. 47(4), pages 911-942, September.
    4. Matthias Kräkel, 2017. "Authority and Incentives in Organizations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(2), pages 295-311, April.
    5. Theilen Bernd, 2009. "Monitoring Gains and Decentralization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-26, September.
    6. Stefan Ambec & Michel Poitevin, 2016. "Decision-making in organizations: when to delegate and whom to delegate," Review of Economic Design, Springer;Society for Economic Design, vol. 20(2), pages 115-143, June.
    7. Dongsoo Shin & Roland Strausz, 2014. "Delegation and dynamic incentives," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 495-520, September.
    8. Stefan Ambec, 2003. "A Theory of Authority in Bilateral Contracting," CSEF Working Papers 102, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    9. Florian Gunsilius & Susanne M. Schennach, 2017. "A nonlinear principal component decomposition," CeMMAP working papers 16/17, Institute for Fiscal Studies.
    10. Itai Arieli & Yakov Babichenko & Fedor Sandomirskiy, 2023. "Persuasion as Transportation," Papers 2307.07672, arXiv.org.
    11. Andrew Lyasoff, 2023. "Self-Aware Transport of Economic Agents," Papers 2303.12567, arXiv.org, revised Jan 2024.
    12. Andreas Roider, 2006. "Delegation of Authority as an Optimal (In)Complete Contract," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(3), pages 391-411, September.
    13. Dasgupta, Amil & Maug, Ernst, 2022. "Delegation chains," LSE Research Online Documents on Economics 118852, London School of Economics and Political Science, LSE Library.
    14. Roger Koenker, 2017. "Quantile regression 40 years on," CeMMAP working papers 36/17, Institute for Fiscal Studies.
    15. Kuan‐Ming Chen & Yu‐Wei Hsieh & Ming‐Jen Lin, 2023. "Reducing Recommendation Inequality Via Two‐Sided Matching: A Field Experiment Of Online Dating," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 1201-1221, August.
    16. Arthur Charpentier & Alfred Galichon & Lucas Vernet, 2019. "Optimal transport on large networks a practitioner guide," SciencePo Working papers Main hal-02173210, HAL.
    17. Altinok Ahmet & Mac Donald Diana E., 2023. "Designing the Menu of Licenses for Foster Care," Working Papers 2023-19, Banco de México.
    18. Pérez, Jessica Helen & Iranzo Sancho, Susana, 2012. "Determinants of Decentralization within the Firm: Some Empirical Evidence from Spanish Small and Medium- Sized Enterprise," Working Papers 2072/211755, Universitat Rovira i Virgili, Department of Economics.
    19. Theilen, Bernd, 2009. "Decentralization and the Gains from Monitoring," Working Papers 2072/42863, Universitat Rovira i Virgili, Department of Economics.
    20. Alfred Galichon & Bernard Salanié, 2023. "Structural Estimation of Matching Markets with Transferable Utility," Post-Print hal-03935865, HAL.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:53:y:2022:i:3:p:484-515. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/randdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.