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Procrastination in Teams, Contract Design and Discrimination

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  • Philipp Weinschenk

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

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.

Suggested Citation

  • Philipp Weinschenk, 2011. "Procrastination in Teams, Contract Design and Discrimination," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2011_13, Max Planck Institute for Research on Collective Goods.
    • Handle: RePEc:mpg:wpaper:2011_13
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    References listed on IDEAS

    as
    1. Roy Radner, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 43-57.
    2. Eric Rasmusen, 1987. "Moral Hazard in Risk-Averse Teams," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 428-435, Autumn.
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    Blog mentions

    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 19:03:00

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    More about this item

    Keywords

    Moral Hazard; team production; partnerships; procrastination; contract design; discrimination;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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