Moral Hazard In Remote Teams

We reexamine the ability of teams to credibly self‐impose group punishments and prevent free riding when individual inputs are unobservable. We formulate self‐imposed group punishments as performance underreporting by the team. Although underreporting is not credible in a static game, we show that simple strategies can sustain underreporting in a repeated game, and that the threat of underreporting improves welfare only if team members' preferences between shirking and team output consumption are nonseparable. Our results suggest that self‐assessments can replace increased managerial monitoring in remote work environments.