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The optimal assortativity of teams inside the firm

Author

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  • Ashwin Kambhampati
  • Carlos Segura‐Rodriguez

Abstract

How does a profit‐maximizing manager form teams and compensate workers when workers have private information about their productivity and exert hidden effort once in a team? We study a team‐production model in which positive assortative matching is both efficient and profit‐maximizing under pure adverse selection and pure moral hazard. We show that the interaction of adverse selection and moral hazard can lead to nonassortative matching if complementarities are sufficiently weak. When this is the case, the manager may prefer to delegate matching, allowing workers to sort themselves into teams.

Suggested Citation

  • Ashwin Kambhampati & Carlos Segura‐Rodriguez, 2022. "The optimal assortativity of teams inside the firm," RAND Journal of Economics, RAND Corporation, vol. 53(3), pages 484-515, September.
    • Handle: RePEc:bla:randje:v:53:y:2022:i:3:p:484-515
    DOI: 10.1111/1756-2171.12419
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    References listed on IDEAS

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    Cited by:

    1. Foucart, Renaud & Tan, Jonathan H.W. & Zhao, Zichen, 2025. "Endogenous formation of optimal teams," European Economic Review, Elsevier, vol. 180(C).
    2. Byung-Cheol Kim & Jin Yeub Kim & Hyunjun Cho, 2026. "Talent vs. Fit: Partner Selection and the Moderate's Trap," Working papers 2026rwp-279, Yonsei University, Yonsei Economics Research Institute.
    3. Kambhampati, Ashwin & Segura-Rodriguez, Carlos & Shao, Peng, 2024. "Why informationally diverse teams need not form, even when efficient," Journal of Economic Behavior & Organization, Elsevier, vol. 226(C).

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