Team Production

This topic studies the problem of collective action in a situation that is characteristic of, but not exclusive to labor relations—team production, in which it is costly to ascertain the individual productivity of each participant. An analysis is made to determine how the residual compensation of team managers motivates their own productivity and, indirectly, that of all team members. This provides a basis for a theory of the conventional business firm, by defining an attribute that is essential to organizational hierarchies, namely, that the compensation of hierarchical superiors depends more on the performance of the team as a whole than the compensation of their subordinates.