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Reputation deals: A theory of endogenous teams

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  • Günther Lang

Abstract

This paper complements the traditional theory of teams [Fama, 1980; Holmstrom, 1982a, 1982b] by introducing endogenous team formation by agents who are concerned with their reputations and are informed about the types of their potential teammates. Such a constellation leads to a tradeoff between joining a high-productivity type but a low-reputation partner. Gains from trade are analyzed, both, for the case of non-transferable and transferable utility, and the lessons are discussed that can be learned from observing reputation deals. Finally a signaling model of teaming is developed that captures in a fully rational way the process of information acquisition by the agents' strategic opponent: the market. Copyright International Atlantic Economic Society 2003

Suggested Citation

  • Günther Lang, 2003. "Reputation deals: A theory of endogenous teams," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 31(1), pages 32-50, March.
    • Handle: RePEc:kap:atlecj:v:31:y:2003:i:1:p:32-50
    DOI: 10.1007/BF02298461
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    1. Fudenberg, Drew & Tirole, Jean, 1991. "Perfect Bayesian equilibrium and sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 53(2), pages 236-260, April.
    2. Joseph Farrell & Suzanne Scotchmer, 1988. "Partnerships," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 279-297.
    3. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    4. 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.
    5. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    6. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
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    1. Luís Almeida Costa & Luís Vasconcelos, 2010. "Share the Fame or Share the Blame? The Reputational Implications of Partnerships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 259-301, June.

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