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Teamwork Management in an Era of Diminishing Commitment

Author

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  • Auriol, Emmanuelle
  • Friebel, Guido
  • Pechlivanos, Lambros

Abstract

This paper studies management when the principal has different degrees of commitment power. In a model in which both the principal and agents are symmetrically uncertain about the agents' innate abilities, implicit incentives arise when the principal is not able to commit herself to long-term contracts. The presence of implicit incentives makes the agents more reluctant to behave cooperatively (they actually have incentives to 'sabotage' their colleagues). This forces the principal to offer more 'collectively oriented' incentive schemes than in the presence of commitment, in order to induce the desired level of cooperation. Moreover, teamwork exposes agents to higher risks than the ones they are exposed to in a Taylorist workplace. We find that the optimal team size is constrained by risk considerations, and is decreasing in the uncertainty of the production technology and in the time horizon of the team.

Suggested Citation

  • Auriol, Emmanuelle & Friebel, Guido & Pechlivanos, Lambros, 1999. "Teamwork Management in an Era of Diminishing Commitment," CEPR Discussion Papers 2281, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2281
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    References listed on IDEAS

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    1. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "Minimum Wages and On-the-job Training," NBER Working Papers 7184, National Bureau of Economic Research, Inc.
    2. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    3. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, pages 938-963.
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    Citations

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    Cited by:

    1. Bevia Carmen & Corchón Luis C, 2006. "Rational Sabotage in Cooperative Production with Heterogeneous Agents," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-27, November.
    2. Daniel S. Hamermesh, 2002. "12 Million Salaried Workers are Missing," ILR Review, Cornell University, ILR School, vol. 55(4), pages 649-666, July.
    3. Michael T. Rauh, 2014. "Incentives, wages, employment, and the division of labor in teams," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 533-552, September.
    4. Emmanuelle Auriol & Guido Friebel & Lambros Pechlivanos, 2002. "Career Concerns in Teams," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 289-307, Part.
    5. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 2000. "Multitask agency problems: Focus and task clustering," European Economic Review, Elsevier, vol. 44(4-6), pages 869-877, May.

    More about this item

    Keywords

    Career Concerns; Collective Orientation Of Incentive Schemes; Commitment; Sabotage; Team Size; Teamwork;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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