%0 Journal Article
%T The Optimality of Team Contracts
%A Mehmet Barlo
%A Ay£¿a £¿zdo£¿an
%J Games
%D 2013
%I MDPI AG
%R 10.3390/g4040670
%X This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents who have negative exponential utilities. They can observe and verify each others¡¯ effort levels and draft enforceable side-contracts on effort levels and realized returns. Standard constraints, resulting in incentive contracts, fail to ensure implementability, and we examine centralized collusion-proof contracts and decentralized team contracts, as well. We prove that the principal may restrict attention to team contracts whenever returns from the project satisfy a mild monotonicity condition.
%K principal-agent problems
%K linear contracts
%K collusion
%K team
%K decentralization
%U http://www.mdpi.com/2073-4336/4/4/670