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Symmetry and Efficiency

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  • Raul V. Fabella

    (Professor, School of Economics, University of the Philippines)

Abstract

We consider teams where information asymmetry (adverse selection and moral hazard) is minimized by entry point screening designed to produce homogenous membership and work group arrangements and job rotation that render effort at worst imperfectly observable. We show that under membership symmetry, budget balance and strict rationality, a self-enforcing Pareto efficient (cooperates) and envy-free solution is attainable if and only production technology is of a unique concave family. Even in the absence of moral hazard and adverse selection, a self-enforcing Pareto efficiency remains impossible outside this family.

Suggested Citation

  • Raul V. Fabella, 1997. "Symmetry and Efficiency," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 34(1), pages 99-108, June.
    • Handle: RePEc:phs:prejrn:v:34:y:1997i:1:p:99-108
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    File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/94/486
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    Cited by:

    1. Raul V. Fabella, 2013. "Moral Hazard and Cooperation in Competing Teams," UP School of Economics Discussion Papers 201308, University of the Philippines School of Economics.
    2. Raul V. Fabella, 2013. "Salience and Cooperation Among Rational Egoists," UP School of Economics Discussion Papers 201309, University of the Philippines School of Economics.

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