Cooperation or Collusion? Rents in Relational Contracts for Teams

Relational incentive contracts for teams of multitasking agents

“…Observe that for < 1 and ! 1 , the incentives given in ( 16) - (17) for the hybrid scheme converge to the following limits If the associated surplus for these e¤orts is S(b; ), the hybrid scheme can (for < 1) do no worse than S(b; ) ", for arbitrary " > 0.…”

“…In the appendix we identify some conditions where the hybrid scheme dominates and hence is optimal. We summarize this in the following proposition Proposition 4 For 2 = 1 6 = 1 the hybrid incentive scheme generates e¤ ort incentives given by the right-hand sides of ( 16) - (17), and these cannot both be positve if the signals (x 1 ; x 2 ) are non-negatively correlated ( 0).…”

“…Veri…cation of equations ( 16)- (17). From the formulas for s and ~ in ( 15) and ( 14) we have 1 ~ = (1 ) 2 1 2 +2 +1 = (1 ) 2 (1 )s=s…”

Trust, Investment and Competition: Theory and Evidence from German Car Manufacturers

“…See Calzolari and Spagnolo (2009) for an analysis of the interplay between relational procurement strategies and suppliers' collusion. See also Ishihara and Muramoto (2018) for the tradeoff between collusion and relative performance evaluations in relational contracts for teams. 34 The non-observability of the winning seller's investment before the end of the stage game is consistent with our empirical case.…”

On the optimality of competition within a team

“…In the setup of this paper, there is a noisy ranking instead of a common shock, and the long‐run perspective never tilts the decision of the principal in favor of a JPE contract and of forgoing the use of a noisy ranking. Kvaloy and Olsen (2006), Kim and Vikander (2015), Ishihara (2017), and Ishihara and Muramoto (2019) study optimal team contracts for relational contracts between the principal and the agents when output is non‐verifiable. Ishida (2006) uses the framework of Che and Yoo (2001) and shows that building teams in a firm and evaluating them relative to each other may be an effective way to increase peer monitoring incentives.…”