Centre for Development Economics
and
Department of Economics, Delhi School of Economics

ANNOUNCE A SEMINAR

State Dependent Sharing and Efficiency in Teams

by

Shasi Nandeibam
Department of Economics,
University of Bath

On

30th April 2019 (Tuesday) at 3:00 PM

Venue: Seminar Room (First Floor)
Department of Economics, Delhi School of Economics

All are cordially invited
 Abstract

Most models in the existing literature on moral hazard in teams do not capture the kind of team production settings that we often observe where the random element affecting the final team output can also be observed ex-post. In such situations, it is natural to allow the team’s sharing rule to depend on the observed realizations of both the final output and the random element. So we examine a team problem in which the share of each team member is a function of the observed realizations of the final output and the random element. We provide a necessary and sufficient condition for implementing an outcome in Nash equilibrium. This condition imposes restrictions on those deviations from the outcome that could have been caused unilaterally by each and every member of the team. Using this characterization we also derive a necessary and sufficient condition for implementing an efficient outcome. When the production function has a separable structure, namely, the output can be written as a function of the random element and a composite action: (i) we show that efficient outcomes cannot be implemented if everyone has quasi-linear utility functions; (ii) when the quasi-linearity assumption is dropped, we present some examples in which there are implementable efficient outcomes and also derive some conditions for implementing efficient outcomes. When the production function does not have a separable structure, we present an example which shows that efficient outcomes may be implementable even when all individuals have quasi-linear utility functions and also provide a necessary and sufficient condition for locally implementing efficient outcomes. Finally, when the validity of the first-order approach and nondecreasing share functions are required for implementing any given outcome, we show that it is without loss of generality to consider only the class of sharing rules that are linear in the final output and efficient outcomes cannot be implemented in this case.

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