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How Competition Controls Team Production: The Case of Fishing Firms

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Author Info
Benito Arruñada ()
Manuel González

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Abstract

Under team production, those who monitor individual productivity are usually the only ones compensated with a residual that varies with the performance of the team. This pattern is efficient, as is shown by the prevalence of conventional firms, except for small teams and when specialized monitoring is ineffective. Profit sharing in repeated team production induces all team members to take disciplinary action against underperformers through switching and separation decisions, however. Such action provides effective self-enforcemnt when the markets for team members are competitive, even for large teams using specialized monitoring. The traditional share system of fishing firms shows that for this competition to provide powerful enough incentives the costs of switching teams and measuring team productivity must be bellow. Risk allocation may constrain the organizational design defined by the use of a share system. It does not account for its existence, however.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/261.pdf
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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 261.

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Date of creation: Nov 1997
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Handle: RePEc:upf:upfgen:261

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Related research
Keywords: Theory of the firm; team production; share contracts; profit sharing; remuneration systems; self-enforcement; fishing firms;

Find related papers by JEL classification:
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

References listed on IDEAS
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    Other versions:
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    Other versions:
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  18. Allen, Douglas W & Lueck, Dean, 1995. "Risk Preferences and the Economics of Contracts," American Economic Review, American Economic Association, vol. 85(2), pages 447-51, May. [Downloadable!] (restricted)
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