AbstractThe paper proposes a mechanism that may implement first-best effort in simultaneous teams. Within the framework of this mechanism, each team members is obliged to make a fixed, non-contingent payment, and chooses his individual effort. After the output is produced, each team member receives a gross payment that equals the actual team output. We demonstrate that a Nash equilibrium exists in which each team member chooses first-best effort. We call this mechanism ?Anti-Sharing? since it solves the sharing problem that causes the inefficiency in teams. The Anti-Sharing mechanism requires one player to specialize on the role of an ?Anti-Sharer?. With an external Anti-Sharer who works on a non-profit base, the mechanism can implement first-best effort. If, however, the Anti-Sharer comes from within the team and desires a positive payoff, then the mechanism may implement not more than second-best effort. The latter version of the model could be interpreted as a new theory of firms and partnerships in the sense of the theory of Alchian and Demsetz (1972). --
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Bibliographic InfoPaper provided by Saarland University, CSLE - Center for the Study of Law and Economics in its series CSLE Discussion Paper Series with number 2003-02.
Date of creation: 2003
Date of revision:
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More information through EDIRC
Efficient Effort in Teams; Second-Best Solution; Partnerships;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
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- Alchian, Armen A & Demsetz, Harold, 1972.
"Production , Information Costs, and Economic Organization,"
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American Economic Association, vol. 62(5), pages 777-95, December.
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- Varian, H,R., 1991.
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- Hal R. Varian, 1994. "A Solution to the Problem of Externalities when Agents are Well-Informed}," Microeconomics 9401003, EconWPA.
- A. Mitchell Polinsky & Daniel L. Rubinfeld, 2003. "Aligning the Interests of Lawyers and Clients," American Law and Economics Review, Oxford University Press, vol. 5(1), pages 165-188.
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