No. 67: Implicit incentives and delegation in teams

Year: 2021

Type: Working Paper

Open Science:

Self-contained

Abstract

We study an infinitely-repeated game of team production, where agents must supply costly effort under moral hazard. The principal also has the option to delegate an additional production-relevant decision to a team member. We provide conditions under which delegation changes the scope of peer sanction and thus influences the implicit incentives generated by the agents’ repeated interaction. Delegation can then become strictly optimal, despite misaligned preferences and symmetric information regarding the efficient decision. We show that implicit incentives under delegation are strongest in diverse teams and use our results to discuss various aspects of organisational design.

Publication Information

TRR 266 researchers

Harvey Upton Humboldt University of Berlin

DOI

DOI Link

To cite this article

Upton, H. (2021). Implicit incentives and delegation in teams. TRR 266 Accounting for Transparency Working Paper Series No. 66. https://dx.doi.org/10.2139/ssrn.3991736

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Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, Goethe University Frankfurt, University of Cologne and Leibniz University Hannover who share the same research agenda.