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Mixed incentive contracts in partnerships
Author(s) -
Chao Hong,
Siqueira Kevin
Publication year - 2013
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/j.1742-7363.2013.12011.x
Subject(s) - incentive , compensation (psychology) , general partnership , welfare , microeconomics , tournament , teamwork , economics , production (economics) , business , finance , market economy , management , psychology , mathematics , combinatorics , psychoanalysis
This paper illustrates the impact of mixed contracts on teamwork and welfare in a partnership when production depends on the efforts of agents in their own tasks as well as their efforts in helping other teammates. We show that a mixed contract that combines compensation based on team output with that of a tournament based on individual output leads to higher welfare than a purely team‐output‐based contract, despite the possibility of sabotage and the possible adverse impacts that the contract may have on the allocation of agent efforts.