Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/183251
Authors: 
Fahn, Matthias
Hakenes, Hendrik
Year of Publication: 
2017
Series/Report no.: 
Working Paper 1713
Abstract: 
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 and hence a reduction of future utility.
Subjects: 
Self-Control Problems
Teamwork
Relational Contracts
JEL: 
L22
L23
Document Type: 
Working Paper
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