Technology, team production and incentives

Vladimir Smirnov and Andrew Wait ()

Economics Letters, 2016, vol. 141, issue C, 91-94

Abstract: Incentive reversal (IR) is when higher rewards induce some agents to reduce their effort (Winter 2009). We show that IR can hold for all agents when: there is an improvement in production technology; and rewards are based on team output. Whilst IR requires at least one worker’s marginal return to be decreasing in team productivity when agents invest simultaneously, this is not necessary with sequential investments. Rather, IR can occur with sequential investment when the marginal return of effort for all agents is increasing with improvements in technology.

Keywords: Moral hazard in teams; Technology; Productivity; Incentive reversal (search for similar items in EconPapers)
JEL-codes: D21 L23 (search for similar items in EconPapers)
Date: 2016
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Working Paper: Technology, team production and incentives (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:141:y:2016:i:c:p:91-94

DOI: 10.1016/j.econlet.2016.01.027

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