The principal’s dilemma
A recurrent dilemma in team management is to select between a team-based and an individual based wage scheme. We explore such a dilemma in a simple model of production in teams, in which the team members may differ in their effort choices and qualification. We show that, in spite of enhancing output as the basis for payment, a team-based wage scheme might be less profitable for the principal than an individual-based wage scheme. We also highlight a deep misalignment between designing optimal (output-based) incentives for a team and treating its members impartially. Finally, upon introducing the possibility of liquidity constraints in our model, we provide rationale for the so-called "rich get richer" hypothesis.
|Date of creation:||01 Jan 2009|
|Contact details of provider:|| Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2009003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)
If references are entirely missing, you can add them using this form.