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On Broadway and strip malls: how to make a winning team

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  • Bel, Roland
  • Smirnov, Vladimir
  • Wait, Andrew

Abstract

A successful organization - or Broadway production - needs the right team. A potential issue is that an existing synergy between complementary agents (or assets) can reduce the marginal return of effort, creating a disincentive to invest. While agents always prefer to be in a team of complementary workers, a principal may wish to use non-complementary agents; this can occur if the loss from lower investment is sufficiently large. A principal, however, may opt for non-complementary agents when complementary workers would produce greater surplus. These insights have implications for job rotation, the central­ization versus decentralization of decision making and mergers.

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File URL: http://hdl.handle.net/2123/8799
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Bibliographic Info

Paper provided by University of Sydney, School of Economics in its series Working Papers with number 2012-14.

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Date of creation: Nov 2012
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Handle: RePEc:syd:wpaper:2123/8799

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Postal: Sydney, NSW 2006
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Web page: http://sydney.edu.au/arts/economics
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Related research

Keywords: mergers; assets; job rotation; task allocation; complementarity;

This paper has been announced in the following NEP Reports:

References

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  1. Maxim Mai & Vladimir Smirnov & Andrew Wait, 2014. "Ownership, Access, and Sequential Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 203-231, February.
  2. Matt Mitchell & Galina Vereshchagina & April Franco, 2009. "Incentives and the Structure of Teams," 2009 Meeting Papers 758, Society for Economic Dynamics.
  3. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, December.
  4. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 337-388, May.
  5. Segal, Ilya, 2003. "Coordination and discrimination in contracting with externalities: divide and conquer?," Journal of Economic Theory, Elsevier, vol. 113(2), pages 147-181, December.
  6. Thiele, Henrik & Wambach, Achim, 1999. "Wealth Effects in the Principal Agent Model," Journal of Economic Theory, Elsevier, vol. 89(2), pages 247-260, December.
  7. Shai Bernstein & Eyal Winter, 2012. "Contracting with Heterogeneous Externalities," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 50-76, May.
  8. Klor, Esteban F. & Kube, Sebastian & Winter, Eyal & Zultan, Ro'i, 2011. "Can Higher Bonuses Lead to Less Effort? Incentive Reversal in Teams," IZA Discussion Papers 5501, Institute for the Study of Labor (IZA).
  9. Corts, Kenneth S., 2006. "The interaction of task and asset allocation," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 887-906, September.
  10. Anil Arya & Brian Mittendorf, 2004. "Using Return Polices to Elicit Retailer Information," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 617-630, Autumn.
  11. Jeon, Seonghoon, 1996. "Moral hazard and reputational concerns in teams: Implications for organizational choice," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 297-315, May.
  12. Milgrom, Paul & Roberts, John, 1990. "The Efficiency of Equity in Organizational Decision Processes," American Economic Review, American Economic Association, vol. 80(2), pages 154-59, May.
  13. Eyal Winter, 2006. "Optimal incentives for sequential production processes," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 376-390, 06.
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