Enforcing Cooperation in Finitely Repeated Team Production: Theory and Experiments

Rod Falvey (), Tom Lane (), Shravan Luckraz (), Shuo Yang () and Wanjun Zheng ()
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Rod Falvey: Bond University
Tom Lane: Newcastle University
Shravan Luckraz: University of Nottingham Ningbo China
Shuo Yang: University of Nottingham Ningbo China
Wanjun Zheng: Zhejiang University of Finance and Economics

No 2026-05, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: This paper reexamines the Holmström’s moral hazard in teams for environments where team production problems are repeated a finite number of times. Motivated by the observation that many real-world team interactions are naturally repeated while much of the literature emphasizes static peer-evaluation rules or repeated-game constructions that rely on infinite horizons, we adapt a Galbraith Mechanism (GM)-style allocation mechanism to a finitely repeated principal–agent team production setting and evaluate its performance both analytically and in the laboratory. We construct a repeated GM allocation that mixes equal sharing with proportional rewards, characterize subgame-perfect equilibria that sustain higher aggregate effort than static equal-share benchmarks, and design credible finite-horizon history-dependent punishments to select efficient equilibria when multiplicity arises. A laboratory experiment on a twice-repeated game tests the mechanism’s static and dynamic predictions under alternative allocation treatments. Our results show that groups under the (repeated GM) proportional allocation exert significantly higher effort than under (one-shot GM) equal sharing, consistent with theoretical predictions. Observed behavior indicates increased cooperation with repeated interaction.

Keywords: Team Production; Moral Hazard; Finitely Repeated Games; Galbraith Mechanism (search for similar items in EconPapers)
Date: 2026-05
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