Joint Production in Teams



Consider Holmström's moral hazard in teams problem when there are n agents, each agent i has a ai-dimensional strategy space and output can be m-dimensional.  We show that a compensation mechanism that satisfies budget balance, limited liability and implements an efficient allocation generically exists if and only if iai/(n-1)<m.  Moreover, under a weak additional condition, the equilibrium implemented by this mechanism is unique in the class of pure strategy Coalition-Proof equilibria.

Keywords: teams, moral hazard, incentives, theory of the firm.
JEL Classification: D23, L23, D82, J33.

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