Journal ArticleDOI
Moral Hazard in Teams
TLDR
In this article, the authors study moral hazard with many agents and focus on two features that are novel in a multiagent setting: free riding and competition, and show that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally.Abstract:
This article studies moral hazard with many agents. The focus is on two features that are novel in a multiagent setting: free riding and competition. The free-rider problem implies a new role for the principal: administering incentive schemes that do not balance the budget. This new role is essential for controlling incentives and suggests that firms in which ownership and labor are partly separated will have an advantage over partnerships in which output is distributed among agents. A new characterization of informative (hence valuable) monitoring is derived and applied to analyze the value of relative performance evaluation. It is shown that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally. Competition per se is worthless. The role of aggregate measures in relative performance evaluation is also explored, and the implications for investment rules are discussed.read more
Citations
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Journal ArticleDOI
An Empirical Analysis of an Incentive Plan with Relative Performance Measures: Evidence from a Postal Service
Ella Mae Matsumura,Jae Yong Shin +1 more
TL;DR: In this paper, the authors found that financial performance improves following the implementation of an incentive plan that includes relative performance measures, and that under this incentive plan, the degree of common uncertainty is positively associated with store profitability.
Journal ArticleDOI
The Dynamics of Learning with Team Production: Implications for Task Assignment
TL;DR: In this paper, the authors analyze optimal task assignment when a firm needs to learn the abilities of employees and show that no sharing is more (less) attractive than junior sharing if the prior uncertainty about abilities is small (large) relative to exogenous shocks to team production.
Journal ArticleDOI
An Experimental Study of Team Size and Performance on a Complex Task.
TL;DR: This study reports results from an online experiment in which 47 teams of size ranging from n = 1 to 32 collaborated on a realistic crisis mapping task, finding that individuals in teams exerted lower overall effort than independent workers, in part by allocating their effort to less demanding sub-tasks; however, it is found that individual in teams collaborated more with increasing team size.
Journal ArticleDOI
Teams, repeated tasks, and implicit incentives
TL;DR: It is shown that muted incentive contracts may be sufficient to motivate team members by having the team repeat a task, and explicit (contractual) incentives can be substituted by implicit incentives team members provide to each other.
Journal ArticleDOI
Why do corporations become criminals? Ownership, hidden actions, and crime as an agency cost
Cindy R. Alexander,Mark A. Cohen +1 more
TL;DR: In this article, the authors examine the relationship between ownership structure and corporate crime and find that crime occurs less frequently among firms in which management has a larger ownership stake, and that corporate crime tends not to benefit shareholders, ex ante.
References
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Posted Content
Production, information costs, and economic organization
Armen A. Alchian,Harold Demsetz +1 more
TL;DR: In this paper, the authors present a set of reprint articles for which IEEE does not hold copyright. Full text is not available on IEEE Xplore for these articles, but full text can be found on the Internet Archive.
Journal ArticleDOI
Moral Hazard and Observability
TL;DR: In this article, the role of imperfect information in a principal-agent relationship subject to moral hazard is considered, and a necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived.
Posted Content
The Economic Theory of Agency: The Principal's Problem.
TL;DR: The canonical agency problem can be posed as follows as discussed by the authors : the agent may choose an act, aCA, a feasible action space, and the random payoff from this act, w(a, 0), will depend on the random state of nature O(EQ the state space set), unknown to the agent when a is chosen.
Journal ArticleDOI
Reexamination of the perfectness concept for equilibrium points in extensive games
TL;DR: The concept of perfect equilibrium point has been introduced in order to exclude the possibility that disequilibrium behavior is prescribed on unreached subgames [Selten 1965 and 1973]. Unfortunately this definition of perfectness does not remove all difficulties which may arise with respect to unreached parts of the game.
Journal ArticleDOI
Good News and Bad News: Representation Theorems and Applications
TL;DR: In this article, a notion of "favorableness" of news is introduced, characterized, and applied to four simple models: the arrival of good news about a firm's prospects always causes its share price to rise, more favorable evidence about an agent's effort leads the principal to pay a larger bonus, buyers expect that any product information withheld by a salesman is unfavorable to his product, and bidders figure that low bids by their competitors signal a low value for the object being sold.