Team Production in Competitive Labor Markets with Adverse Selection

Michael Kosfeld and Ferdinand von Siemens

No 9833, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Team production is a frequent feature of modern organizations. Combined with team incentives, team production can create externalities among workers, since their utility upon accepting a contract depends on their team?s performance and therefore on their colleagues? productivity. We study the effects of such externalities in a competitive labor market if workers have private information on their productivity. We find that in any competitive equilibrium there must be Pareto-efficient separation of workers according to their productivity. We further find that externalities facilitate equilibrium existence, where under a particular condition on workers? indifference curves even arbitrarily small externalities guarantee equilibrium existence.

Keywords: Adverse selection; Competition; Externality; Team production (search for similar items in EconPapers)
JEL-codes: D24 D82 J30 L22 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-lab
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Citations: View citations in EconPapers (13)

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Journal Article: Team production in competitive labor markets with adverse selection (2014)
Working Paper: Team Production in Competitive Labor Markets with Adverse Selection (2014)
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