Teamwork as a Self-Disciplining Device
- American Economic Journal: Microeconomics (Forthcoming)
We show that team formation can serve as an implicit commitment device to overcome problems of self-control. If individuals have present-biased preferences, effort that is costly today but rewarded at some later point in time is too low from the perspective of an individual’s long-run self. If agents interact repeatedly and can monitor each other, a relational contract involving teamwork can help to improve performance. The mutual promise to work harder is credible because the team breaks up after an agent has not kept this promise – which leads to individual underproduction in the future, reducing future utility.
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