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Efficient Inequity–Averse Teams

Author

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  • Li, Jianpei

Abstract

This paper analyzes the efficiency of team production when agents exhibit other regarding preferences. It is shown that full efficiency can be sustained as an equilibrium through a budget-balancing mechanism that punishes some randomly chosen agents if output falls short of efficient level but distributes the output equally otherwise, provided that the agents are sufficiently inequity averse.

Suggested Citation

  • Li, Jianpei, 2007. "Efficient Inequity–Averse Teams," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 210, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:210
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    File URL: https://epub.ub.uni-muenchen.de/13342/1/210.pdf
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    More about this item

    Keywords

    moral hazard; team production; inequity aversion;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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