7 - Team Work Flashcards
1
Q
Which factors increase gains from teamwork?
A
- strong differences in skills and information between workers
- high relevance of one person’s knowledge for other workers
- low communication costs
2
Q
What does this graph show?
A
Person 4 has an absolute advantage in design & operations.
- If person 2 has a question about design, person 4 is a better resource than person 3.
- If person 3 has a question about operations, person 4 is a better resource than person 2.
A hierarchical organization, where person 4 is the supervisor to whom all go to consult, could work best.
3
Q
What does this graph show?
A
- person 2 is strong on operational but weak on design, the opposite is true for person 3.
- If person 2 (person 3) needs to think about design (operations), person 3 (person 2) is good to ask.
- Team communication seems best because each person has an absolute advantage in one of the two skills. When the design expert works with the operations expert, they produce a new product design that is better than the two individuals could have produced working independently.
4
Q
What are other advantages of teamwork?
A
- gains from specialization: workers can specialize in a narrow set of tasks, getting better and faster at these tasks (Adam Smith’s pin factory) -> specialization can reinforce skill complementarities
- nonpecuniary benefits: people might enjoy working with others because work becomes less repetitive and more fun
5
Q
What are disadvantages of teamwork?
A
- teams can be time consuming to organize & coordinate
- assessing individual performance becomes harder -> free riding can exacerbate moral hazard problems relative to independent work
6
Q
What is the free-riding problem in teams(firms)?
A
- Team member i chooses ei to maximize :
1/n * q − c(ei),
taking the other team members’ efforts as given. - Dominant strategy: ei = 1/n for all i
- Effort is inefficiently low because team members do not internalize the positive externality of effort on other team members. -> free riding
- The larger the team, the more severe is the free riding problem.
7
Q
How can the owner of the firm overcome the free-rider problem?
A
- Firm owner offers each team member a share si of the team output and a flat wage fi.
- The firm owner sets si = 1 and extracts the team members’ surplus by a negative flat wage (similar to a selling-the-firm contract with one agent).
- The free riding problem is solved because the firm owner can act as a budget breaker.
- But: Such contracts are usually not feasible in practice.
8
Q
How can teams establish and enforce work norms?
A
- within the team, individual efforts are often observable ) mutual monitoring
- shirkers can be punished, e.g., by team pressure or future non-cooperation
- idea is similar to relational contracting