Monitoring Team Members: Information Waste and the Transparency Trap

Matteo Camboni and Michael Porcellacchia

American Economic Journal: Microeconomics, 2025, vol. 17, issue 3, 324-68

Abstract: In a model of moral hazard in teams, we demonstrate that firms' concerns about low trust among teammates can justify two common but otherwise puzzling patterns: information waste and transparency trap. We find firms predominantly employ individual performance bonuses, ignoring that relevant information about team output and competition for better contracts leads workers into a self-defeating race toward effort transparency. Notably, the firm may be indifferent to or benefit from trust concerns, challenging the idea that robustness concerns invariably harm the principal's payoffs. Our analysis highlights a novel trade-off between the classical information rents and strategic insurance rents emerging from trust concerns.

JEL-codes: D21 D82 D86 J33 M54 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/mic.20240240

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