The optimality of team contracts

Barlo, Mehmet and Özdoğan, Ayça (2013) The optimality of team contracts. Games, 4 (4). pp. 670-689. ISSN 2073-4336

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Official URL: http://dx.doi.org/10.3390/g4040670


This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents who have negative exponential utilities. They can observe and verify each others’ effort levels and draft enforceable side-contracts on effort levels and realized returns. Standard constraints, resulting in incentive contracts, fail to ensure implementability, and we examine centralized collusion-proof contracts and decentralized team contracts, as well. We prove that the principal may restrict attention to team contracts whenever returns from the project satisfy a mild monotonicity condition.

Item Type:Article
Uncontrolled Keywords:principal-agent problems; linear contracts; collusion; team; decentralization
Subjects:H Social Sciences > HB Economic Theory > HB135-147 Mathematical economics. Quantitative methods
H Social Sciences > HB Economic Theory
ID Code:23103
Deposited By:Mehmet Barlo
Deposited On:24 Dec 2013 16:12
Last Modified:01 Aug 2019 15:12

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