Individual versus Team Production with Social Preferences

Banerjee, Swapnendu and Chakraborty, Somenath (2025): Individual versus Team Production with Social Preferences.

Abstract

We examine the impact of social preferences on the choice between individual production and team production. An inequity-averse principal can hire a single or a team of two agents to work on a single project. The agents are inequity-averse with respect to the principal. We show that even without ‘synergy’ a moderately inequity-averse principal can opt for team production. Thus we provide an additional rationale for the empirically observed prevalence of team based production in terms of the possible existence of social preferences. For sufficiently inequity-averse principal the incentive for team production remains the same across short-term and long-term relationships.

• Item Type: MPRA Paper
• Language: English
• Keywords: Social Preferences; Inequity Aversion; Individual Production; Team Production; Synergy.
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production

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