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On the optimal management of teams under budget constraints

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  • Dunia López-Pintado

    () (Department of Economics, Universidad Pablo de Olavide; CORE, Université catholique de Louvain)

  • Juan D. Moreno-Ternero

    () (Department of Economics, Universidad Pablo de Olavide; CORE, Université catholique de Louvain)

Abstract

We study optimal wage schemes for teams, under the presence of budget constraints, in a model in which agents’ effort decisions are mapped into the probability of the team’s success. We show that (first-best) efficiency can only be attained with complex contracts that are vulnerable to ex post manipulations and off-equilibrium path violations of the budget constraints. Within the domain of simple (and budget-balanced) contracts, an interesting scheme, which treats equal members of the team unequally, emerges as optimal

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File URL: http://www.upo.es/serv/bib/wps/econ1111.pdf
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Bibliographic Info

Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 11.11.

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Length: 22 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:pab:wpaper:11.11

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Keywords: Team production; budget constraints; efficiency; manipulability; impartiality;

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  7. MORENO-TERNERO, Juan D. & ROEMER, John E., 2005. "Impartiality, priority, and solidarity in the theory of justice," CORE Discussion Papers 2005077, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  17. Strausz, Roland, 1999. "Efficiency in Sequential Partnerships," Journal of Economic Theory, Elsevier, vol. 85(1), pages 140-156, March.
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