Projects and Team Dynamics. (18th September 2014)

• Record Type: Journal Article
• Authors: Georgiadis, George
• Is Part Of: Review of economic studies. Volume 82:Number 1(2015:Jan.)
• Page Start: 187
• Page End: 218
• Publication Date: 2014-09-18
• Subjects: Projects -- Moral hazard in teams -- Team formation -- Partnerships -- Differential games; D7 -- H4 -- L22 -- M5; Economics -- Periodicals; 330
• DOI: 10.1093/restud/rdu031
• Languages: English
• ISSNs: 0034-6527

Abstract

Abstract: I study a dynamic problem in which a group of agents collaborate over time to complete a project. The project progresses at a rate that depends on the agents' efforts, and it generates a pay-off upon completion. I show that agents work harder the closer the project is to completion, and members of a larger team work harder than members of a smaller team—both individually and on aggregate—if and only if the project is sufficiently far from completion. I apply these results to determine the optimal size of a self-organized partnership, and to study the manager's problem who recruits agents to carry out a project, and must determine the team size and its members' incentive contracts. The main results are: (i) that the optimal symmetric contract compensates the agents only upon completing the project; and (ii) the optimal team size decreases in the expected length of the project.