Open AccessUncertainty‐driven cooperation
Author(s) -
Cetemen Doruk,
Hwang Ilwoo,
Kaya Ayça
Publication year - 2020
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te3616
Subject(s) - interim , incentive , free riding , ratchet effect , microeconomics , computer science , production (economics) , risk analysis (engineering) , ratchet , environmental economics , economics , business , archaeology , artificial intelligence , chaotic , history
We consider dynamic team production in the presence of uncertainty. Team members receive interim feedback that depends on both their current effort level and the project's uncertain prospects. In this environment, each member can encourage the others by making them more optimistic about the project's prospects. We study the extent to which this incentive counters the usual free‐riding incentive. Restricting the agents' access to feedback can increase their equilibrium effort levels by mitigating the ratchet effect. In this case, using joint performance measures can be beneficial even when individual measures are available.