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Internalizing Team Production Externalities through Delegation: The British Passenger Rail Sector as an Example

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  • RAFAEL HORTALA-VALLVE
  • MIGUEL SANCHEZ VILLALBA

Abstract

We show that in situations of team production, the associated externality between workers can be partially internalized via the delegation of authority of contracting rights, thus improving the overall efficiency of organizations. A delegated structure provides further incentives to individuals in higher tiers of the hierarchy because it makes them residual claimants. Our model sheds light on recent debates about the organization of the British passenger rail sector. Copyright (c) The London School of Economics and Political Science 2009.

Suggested Citation

  • Rafael Hortala-Vallve & Miguel Sanchez Villalba, 2010. "Internalizing Team Production Externalities through Delegation: The British Passenger Rail Sector as an Example," Economica, London School of Economics and Political Science, vol. 77(308), pages 785-792, October.
  • Handle: RePEc:bla:econom:v:77:y:2010:i:308:p:785-792
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    Cited by:

    1. Felli, Leonardo & Hortala-Vallve, Rafael, 2016. "Collusion, Blackmail and Whistle-Blowing," Quarterly Journal of Political Science, now publishers, vol. 11(3), pages 279-312, October.
    2. Leonardo Felli, 1996. "Preventing Collusion Through Discretion," STICERD - Theoretical Economics Paper Series /1996/303, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    3. Barlo, Mehmet & Ayca, Ozdogan, 2012. "Team beats collusion," MPRA Paper 37449, University Library of Munich, Germany.
    4. Mehmet Barlo & Ayça Özdoğan, 2013. "The Optimality of Team Contracts," Games, MDPI, Open Access Journal, vol. 4(4), pages 1-20, November.

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