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The Optimality of Team Contracts

FASS, Sabancı University, Tuzla, Istanbul 34956, Turkey
Department of Economics, TOBB University of Economics and Technology, Sögütözü Cad. No. 43, Sögütözü, Ankara 06560, Turkey
Author to whom correspondence should be addressed.
Received: 11 April 2013 / Revised: 31 October 2013 / Accepted: 11 November 2013 / Published: 18 November 2013
(This article belongs to the Special Issue Contract Theory)
This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents who have negative exponential utilities. They can observe and verify each others’ effort levels and draft enforceable side-contracts on effort levels and realized returns. Standard constraints, resulting in incentive contracts, fail to ensure implementability, and we examine centralized collusion-proof contracts and decentralized team contracts, as well. We prove that the principal may restrict attention to team contracts whenever returns from the project satisfy a mild monotonicity condition. View Full-Text
Keywords: principal-agent problems; linear contracts; collusion; team; decentralization principal-agent problems; linear contracts; collusion; team; decentralization
MDPI and ACS Style

Barlo, M.; Özdoğan, A. The Optimality of Team Contracts. Games 2013, 4, 670-689.

AMA Style

Barlo M, Özdoğan A. The Optimality of Team Contracts. Games. 2013; 4(4):670-689.

Chicago/Turabian Style

Barlo, Mehmet, and Ayça Özdoğan. 2013. "The Optimality of Team Contracts" Games 4, no. 4: 670-689.

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