Project Selection and Execution in Teams

Blanes, Jordi; Möller, Marc (2016). Project Selection and Execution in Teams. The RAND Journal of Economics, 47(1), pp. 166-185. Wiley 10.1111/1756-2171.12122

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We use a mechanism-design approach to study a team whose members select a joint project and exert individual efforts to execute it. Members have private information about the qualities of alternative projects. Information sharing is obstructed by a trade-off between adaptation and motivation. We determine the conditions under which first-best project and effort choices are implementable and show that these conditions can become relaxed as the team grows in size. We also characterize the second-best mechanism and find that it may include a “motivational bias,” that is, a bias in favor of the team's initially preferred project, and higher-than-optimal effort by uninformed team members.

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