Professional Reputation Concerns, Team Production And Wage Contracts

The aim of team production is to exploit cooperation between team members and toreduce the risk that team members bear so that they can produce as much as possible.Career Concem theory emphasizes that when principal utilizes contract to induceagent to achieve principal's aim, he should consider the effect of how agent's action isinfluenced by his concern about his career future. In the environment of dynamic teamproduction, team contract should be designed to consider team member's careerconcern and its effect on team member's cooperative behavior. In order to explore theimplicit incentive to promote cooperation between team members, it's important toconsider the synthetic effect of different kinds of performance oriented wagecontract, the possibility of performance contractibility, the prior relation of teammembers' task-specific talent, the relation of tasks exogenous shock and teammembers'risk attitude. In a dynamic team model with multi-tasks, this paper discussesthis issue. The main conclusion is as follow:First, in the case of individual performance oriented,performance non-contractibleand fixed wage contract, when the prior relation of team members' task-specific talentis higher than the relation of tasks exogenous shock, career concem effect encouragesteam member's cooperative behavior. Team performance oriented fixed wage contractcan always arouse team member's career concern so that team members cooperatewith each other and bear less risk.Second, in the case of individual performance oriented,performance contractibleand linear incentive wage contract, when the prior relation between team members'task-specific talent is higher than the relation of exogenous shock between task andteam members'risk attitude and team member's risk averse attitude is sufficientlyhigh, that career concern effect domains arouses team member's cooperative tendency.Because the implict incentive on one's own duty is stronger than that on his partner'sduty, the explicit incentive on one's own duty is weaker than that on his partner'sduty. In the case of team performance oriented incentive wage contract, if team member's risk averse degree is sufficiently high, that career concern effect domainsencourages team member's cooperative behavior. Because the implict incentive onone's own duty is the same as that on his partner's duty, the explicit incentive on one'sown duty is also equal to that on his partner's duty.Third, under task rotation policy, individual performance oriented contract arousesteam member's stronger career concern effect that encourages cooperative behavior ortendancy, which is different from task specialization policy. Under performancenon-contractible fixed wage contract, career concern effect always encourages teammember's cooperative behavior. Under performance contractible linear incentive wagecontract, when the prior relation between team members' task-specific talent is equalto the relation of exogenous shock between task and team member's risk averseattitude isn't zero, or when the prior relation between team members' task-specifictalent is higher than the relation of exogenous shock between task and team member'srisk averse attitude is in certain scope, that career concern effect domains arouses teammember's cooperative behavior. Because the implict incentive on one's own duty isweaker than that on his partner's duty, the explicit incentive on one's own duty isstronger than that on his partner's duty.Fourth, In the environment of imperfect team performance oriented,performancecontractible and linear incentive wage contract and the possibility of team member'smobility, when team member's risk averse degree is sufficiently high, career concerneffect domains, team member's cooperative behavior choice reacting to explicitincentive is much more sensitive, so that optimal explicit incentive on his partner'sduty that principal provides to team member and optimal effort on his partner's dutyteam member supply will be upward distorted, and the degree of upward distortionwill be raised as the possibility of team member's leaving the team after his earlycareer raises.