Teams in Relational Contracts

Download or read book Teams in Relational Contracts written by Ola Kvaloy and published by . This book was released on 2016 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze relational contracting between a principal and a team of agents where only aggregate output is observable. We deduce optimal team incentive contracts under different set of assumptions, and show that the principal can use team size and team composition as instruments in order to improve incentives. In particular, the principal can strengthen the agents' incentives by composing teams that utilize stochastic dependencies between the agents' outputs. We also show that more agents in the team may under certain conditions increase each team member's effort incentives, in particular if outputs are negatively correlated.