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On the optimal management of teams under budget constraints

Author

Listed:
  • Dunia López-Pintado

    () (Department of Economics, Universidad Pablo de Olavide; CORE, Université catholique de Louvain)

  • Juan D. Moreno-Ternero

    () (Department of Economics, Universidad Pablo de Olavide; CORE, Université catholique de Louvain)

Abstract

We study optimal wage schemes for teams, under the presence of budget constraints, in a model in which agents’ effort decisions are mapped into the probability of the team’s success. We show that (first-best) efficiency can only be attained with complex contracts that are vulnerable to ex post manipulations and off-equilibrium path violations of the budget constraints. Within the domain of simple (and budget-balanced) contracts, an interesting scheme, which treats equal members of the team unequally, emerges as optimal

Suggested Citation

  • Dunia López-Pintado & Juan D. Moreno-Ternero, 2011. "On the optimal management of teams under budget constraints," Working Papers 11.11, Universidad Pablo de Olavide, Department of Economics.
  • Handle: RePEc:pab:wpaper:11.11
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    File URL: http://www.upo.es/serv/bib/wps/econ1111.pdf
    File Function: First version, 2011
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    References listed on IDEAS

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    Cited by:

    1. López-Pintado, Dunia & Moreno-Ternero, Juan D., 2014. "On discrimination in the optimal management of teams," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 154-162.

    More about this item

    Keywords

    Team production; budget constraints; efficiency; manipulability; impartiality;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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