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Optimal Information System for Teams

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  • Seung-Woon Yoo
  • Sung-Soo Yoon

Abstract

This paper investigates an optimal information system for teams when externalities exist between team members' performance. Using a discrete model reflecting a sequential manufacturing process, we show that a team information system is better than an individual information system when the second agent utilizes information about the first agent's performance to decide her or his effort level. This decision-facilitating effect of the individual performance information increases the principal's expected costs of inducing the agent's desirable effort. In order to avoid this negative effect of the individual performance information, the principal may delay the inspection until all production processes are finished.

Suggested Citation

  • Seung-Woon Yoo & Sung-Soo Yoon, 2010. "Optimal Information System for Teams," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 17(2), pages 129-149.
    • Handle: RePEc:taf:raaexx:v:17:y:2010:i:2:p:129-149
    DOI: 10.1080/16081625.2010.9720857
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    References listed on IDEAS

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    1. Itoh Hideshi, 1993. "Coalitions, Incentives, and Risk Sharing," Journal of Economic Theory, Elsevier, vol. 60(2), pages 410-427, August.
    2. Hemmer, Thomas, 1995. "On the interrelation between production technology, job design, and incentives," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 209-245, April.
    3. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June.
    4. Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
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