Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Teams in Relational Contracts
() and Trond E. Olsen
Abstract: 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 di€erent 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.
Keywords: Relational contracts; team incentive scheme; (follow links to similar papers)
JEL-Codes: D00; D20; D21; D80; D86; (follow links to similar papers)
47 pages, December 16, 2016
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