Communities, Co-ops, and Clubs: Social Capital and Incentives in Large Collective Organizations

Joshua A. Jacobs, Aaron M. Kolb and Curtis R. Taylor

American Economic Journal: Microeconomics, 2021, vol. 13, issue 3, 29-69

Abstract: We study a continuous-time organization design problem. Each member's output is an imperfect signal of his underlying effort, and each member's utility from remaining in the organization is endogenous to other members' efforts. Monetary transfers are assumed infeasible. Incentives can be provided only through two channels: expulsion following poor performance and respite following good performance. We derive the steady state distribution of members' continuation utilities for arbitrary values of the initial and maximum continuation utilities and then optimize these values according to organizational objectives. An optimally designed organization can be implemented by associating continuation utilities with a performance-tracking reputation system.

JEL-codes: D23 D82 D86 P13 Z13 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1257/mic.20180359

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