City Research Online

Uncertainty-driven cooperation

Cetemen, D. ORCID: 0000-0002-1934-4685, Hwang, I. & Kaya, A. (2020). Uncertainty-driven cooperation. Theoretical Economics, 15(3), pp. 1023-1058. doi: 10.3982/TE3616


We consider dynamic team production in the presence of uncertainty. Team members receive interim feedback that depends on both their current effort level and the project's uncertain prospects. In this environment, each member can encourage the others by making them more optimistic about the project's prospects. We study the extent to which this incentive counters the usual free-riding incentive. Restricting the agents' access to feedback can increase their equilibrium effort levels by mitigating the ratchet effect. In this case, using joint performance measures can be beneficial even when individual measures are available.

Publication Type: Article
Additional Information: ©2020 The Authors. Licensed under the Creative Commons Attribution-NonCommercial License 4.0. Available at
Publisher Keywords: Team production, free-riding, uncertainty, learning
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HM Sociology
Departments: School of Policy & Global Affairs > Economics
Text - Published Version
Available under License Creative Commons Attribution Non-commercial.

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