We study the role of information exchange, leadership, and coordination in team and partnership structures. For this purpose, we view individuals jointly engaging in productive processes-a "team"-as endowed with individual and privately held information on the joint production process. Once each team member decides on whether or not to share his private information truthfully, he chooses which effort to exert in the joint production process. This effort, however, is not contractible: only the realized output (or profit) of the team can be observed. Our central question is whether or not incentives can be provided to a team in this environment such that team members communicate their private information and exert efficient productive efforts on the basis of this communication. Our main result shows that there exists a simple ranking-based contract that implements both desiderata in a wide set of situations.
Bibliographical noteFunding Information:
We are grateful to the editor and three anonymous referees for constructive suggestions. We thank Mike Borns, Peter Spencer and Ruqu Wang for helpful comments and discussions. Gershkov thanks the Maurice Falk Institute for Economic Research and the Israel Science Foundation (grant 83/12 ) for financial support. Li thanks the Program for New Century Excellent Talents in University under project NCET-13-0726 for financial support. Schweinzer is grateful for the hospitality of the University of International Business and Economics and of the University of Adelaide.
© 2016 Elsevier Inc.
- Adverse selection
- Moral hazard