Individual Accountability in Teams
AbstractWe consider a team production problem in which the principal observes only the group output and not individual effort and in which the principal can only penalize an agent for poor performance if she has verifiable evidence that the agent in question did not fulfill his job assignment. In this environment, agents have an incentive to shirk. However, we show that by including monitoring in the agents' job assignments, the principal induces the agents to exert effort and achieves the first-best. In particular, even though equilibrium job assignments include monitoring, this serves only to provide incentives for effort, and agents do not engage in wasteful monitoring in equilibrium.
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Bibliographic InfoPaper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 494.
Length: 27 pages
Date of creation: Jun 2002
Date of revision:
Contact details of provider:
Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.
Individual Liability; Moral Hazard in Teams;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-08 (All new papers)
- NEP-CDM-2002-07-08 (Collective Decision-Making)
- NEP-LAW-2002-07-08 (Law & Economics)
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