Communities, Co-ops, and Clubs: Social Capital and Incentives in Large Collective Organizations
Joshua A. Jacobs
Aaron M. Kolb
Curtis R. Taylor
- American Economic Journal: Microeconomics (Forthcoming)
We study a continuous-time organization design problem. Each
member's output is an imperfect signal of his underlying effort, and
each member's utility from remaining in the organization is endogenous to other members' efforts. Monetary transfers are assumed
infeasible. Incentives can be provided only through two channels:
expulsion following poor performance and respite following good
performance. We derive the steady state distribution of members'
continuation utilities for arbitrary values of the initial and maximum continuation utilities and then optimize these values according
to organizational objectives. An optimally designed organization
can be implemented by associating continuation utilities with a
performance-tracking reputation system.
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