Free Riding and Unequal Pay in Symmetric Teams

Huseyin Yildirim

American Economic Journal: Microeconomics, 2025, vol. 17, issue 3, 289-323

Abstract: This paper studies dynamic incentive pay in teams where agents' efforts are perfect substitutes. It shows that the principal may unequally reward identical agents to mitigate dynamic free riding in the form of procrastination. Unequal pay effectively creates a "team leader" who overworks and symmetric "followers" who underwork. Such leader-follower teams emerge if (i) agents are relatively patient or few, or (ii) the principal sufficiently cares about or is not patient for project success. These findings contrast with the recent literature (e.g., Winter 2004), pinpointing effort complementarity as the source of unequal pay in symmetric teams.

JEL-codes: D82 J22 J31 M52 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/mic.20230179

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