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Optimal Contracts for Teams: A Note

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  • Vander Veen, Thomas D

Abstract

In a team subject to adverse selection and moral hazard, R. P. McAfee and J. MacMillan (1991) found, surprisingly, that, under certain conditions, the outcome is unaffected whether the principal observes only total output or whether the principal can observe each person's individual contribution to the production of the output. This leads McAfee and MacMillan to conclude that the purpose of monitoring is to discipline the monitor. However, when team members are risk averse, the principal can benefit by monitoring. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Vander Veen, Thomas D, 1995. "Optimal Contracts for Teams: A Note," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 1051-1056, November.
    • Handle: RePEc:ier:iecrev:v:36:y:1995:i:4:p:1051-56
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    Cited by:

    1. Thierry Granger, 1997. "Le renouveau de la théorie des organisations. Lecture critique de trois ouvrages récents," Revue Économique, Programme National Persée, vol. 48(1), pages 147-180.
    2. Breton, Michèle & St-Amour, Pascal & Vencatachellum, Désiré, 1998. "Birds of a Feather: Teams as a Screening Mechanism," Cahiers de recherche 9808, Université Laval - Département d'économique.
    3. Parimal K. Bag & Peng Wang, 2019. "Dominance of contributions monitoring in teams," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 53(3), pages 467-495, October.
    4. Breton, Michele & St-Amour, Pascal & Vencatachellum, Desire, 2003. "Dynamic production teams with strategic behavior," Journal of Economic Dynamics and Control, Elsevier, vol. 27(5), pages 875-905, March.
    5. María Verónica Alderete, 2015. "Redes de pymes: una visión desde las teorías de club y de equipo," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 17(32), pages 317-348, January-J.
    6. Serhat Doğan & Kerim Keskin & Çağrı Sağlam, 2019. "Sabotage in team contests," Public Choice, Springer, vol. 180(3), pages 383-405, September.
    7. Benjamin Bental & Bruno Deffains & Dominique Demougin, 2020. "Interpreting contracts: the purposive approach and non-comprehensive incentive contracts," European Journal of Law and Economics, Springer, vol. 50(2), pages 241-265, October.

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