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Procrastination in Teams, Contract Design and Discrimination

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  • Philipp Weinschenk

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    (Max Planck Institute for Research on Collective Goods, Bonn)

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    Abstract

    We study a dynamic model of team production with moral hazard. We show that the players begin to invest effort only shortly before the time limit when the reward for solving the task is shared equally. We explore how the team can design contracts to mitigate this form of procrastination and show that the second-best optimal contract is discriminatory. We investigate how limited liability or the threat of sabotage influences the team’s problem. It is further shown that players who earn higher wages can be worse off than teammates with lower wages and that present-biased preferences can mitigate procrastination.

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    Bibliographic Info

    Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2011_13.

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    Date of creation: Jul 2011
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    Handle: RePEc:mpg:wpaper:2011_13

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    Related research

    Keywords: Moral Hazard; team production; partnerships; procrastination; contract design; discrimination;

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    1. Eric Rasmusen, 1987. "Moral Hazard in Risk-Averse Teams," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 428-435, Autumn.
    2. Radner, Roy, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 43-57, January.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Procrastination in team work
      by Economic Logician in Economic Logic on 2011-08-12 14:03:00

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