Team Production in Competitive Labor Markets with Adverse Selection

Arbeitspapier

Team production is a frequent feature of modern organizations. Combined with team incentives, team production can create externalities among workers, since their utility upon accepting a contract depends on their team's performance and therefore on their colleagues' productivity. We study the effects of such externalities in a competitive labor market if workers have private information on their productivity. We find that in any competitive equilibrium there must be Pareto-efficient separation of workers according to their productivity. We further find that externalities facilitate equilibrium existence, where under a particular condition on workers' indifference curves even arbitrarily small externalities guarantee equilibrium existence.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4638

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Wages, Compensation, and Labor Costs: General ; Firm Organization and Market Structure
• Subject: team production ; competition ; adverse selection ; externality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): von Siemens, Ferdinand ; Kosfeld, Michael
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/93410
• Last update: 10.03.2025, 11:44 AM CET