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Abstract

We present a model of cooperative production in which rational agents might carry out sabotage activities that decrease output. We provide necessary and sufficient conditions for the existence of a Nash equilibrium without sabotage. It is shown that the absence of sabotage in equilibrium depends on the interplay between technology, relative productivity of agents and the degree of meritocracy. In particular we show that, ceteris paribus, meritocratic systems give more incentives to sabotage than egalitarian systems.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we20090204.

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Date of creation: Feb 2006
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Handle: RePEc:cte:werepe:we20090204

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Related research

Keywords: Cooperative production; sharing rules; sabotage;

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Find related papers by JEL classification:

• D20 - Microeconomics - - Production and Organizations - - - General
• D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
• J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms

References

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1. Fabella, Raul V., 1988. "Natural team sharing and team productivity," Economics Letters, Elsevier, vol. 27(2), pages 105-110.
2. Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
3. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
4. Harbring, Christine & Irlenbusch, Bernd, 2005. "How Many Winners Are Good to Have? On Tournaments with Sabotage," IZA Discussion Papers 1777, Institute for the Study of Labor (IZA).
5. Michael Kremer, 1997. "Why are Worker Cooperatives So Rare?," NBER Working Papers 6118, National Bureau of Economic Research, Inc.
6. Genicot, C. & Skaperdas, S., 2000. "Investing in Confict Management," Papers 00-01-17, California Irvine - School of Social Sciences.
7. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
8. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
9. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
   
   • Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
10. Barry J. Nalebuff & Joseph E. Stiglitz, 1983. "Prices and Incentives: Towards a General Theory of Compensation and Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 21-43, Spring.
11. Mui, Vai-Lam, 1995. "The economics of envy," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 311-336, May.
    
    • Mui, V.L., 1992. "The Economics of Envy," Papers 9306, Southern California - Department of Economics.
12. Robert Gibbons, 1998. "Incentives in Organizations," NBER Working Papers 6695, National Bureau of Economic Research, Inc.
13. Pfingsten, Andreas, 1991. "Surplus-sharing methods," Mathematical Social Sciences, Elsevier, vol. 21(3), pages 287-301, June.
14. Kong-Pin Chen, 2003. "Sabotage in Promotion Tournaments," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 119-140, April.
15. Roemer John E. & Silvestre Joaquim, 1993. "The Proportional Solution for Economies with Both Private and Public Ownership," Journal of Economic Theory, Elsevier, vol. 59(2), pages 426-444, April.
16. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
17. Konrad, Kai A, 2000. "Sabotage in Rent-Seeking Contests," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 155-65, April.
18. Harbring, Christine & Irlenbusch, Bernd, 2008. "How many winners are good to have?: On tournaments with sabotage," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 682-702, March.
19. Auriol, Emmanuelle & Friebel, Guido & Pechlivanos, Lambros, 1999. "Teamwork Management in an Era of Diminishing Commitment," CEPR Discussion Papers 2281, C.E.P.R. Discussion Papers.

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