Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93410
Authors: 
von Siemens, Ferdinand
Kosfeld, Michael
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4638
Abstract: 
Team production is a frequent feature of modern organizations. Combined with team incentives, team production can create externalities among workers, since their utility upon accepting a contract depends on their team's performance and therefore on their colleagues' productivity. We study the effects of such externalities in a competitive labor market if workers have private information on their productivity. We find that in any competitive equilibrium there must be Pareto-efficient separation of workers according to their productivity. We further find that externalities facilitate equilibrium existence, where under a particular condition on workers' indifference curves even arbitrarily small externalities guarantee equilibrium existence.
Subjects: 
team production
competition
adverse selection
externality
JEL: 
D82
D24
J30
L22
Document Type: 
Working Paper

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