Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107302
Authors: 
Fahn, Matthias
Hakenes, Hendrik
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 5131
Abstract: 
We show that team formation can serve as an implicit commitment device to overcome problems of self-control. In a situation where individuals have present-biased preferences, any 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 an agent's 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 (under-) production in the future and reduces an agent's future utility. This holds even though the standard free-rider problem is present and teamwork renders no technological benefits. Moreover, we show that even if teamwork does render technological benefits, the performance of a team of present-biased agents can actually be better than the performance of a team of time-consistent agents.
Subjects: 
procrastination
hyperbolic discounting
self-control problems
teamwork
relational contracts
JEL: 
L22
L23
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.