1. Results 27.2 and 27.3 characterize agents’ incentives to join a team and incumbents’ incentives to admit new members when all members are paid according to the equal sharing rule, Yi = Q/N. Discuss how those results would change if the team used each of the following alternative pay schemes:

a. Arbitrary, unequal shares: Yi = αi Q, where i N

∑ =1 αi = 1 and the α’s are randomly assigned to workers.

b. Full pay for productivity: Yi = di

, that is, each worker is paid for full contribution to the team’s output.

c. Partial pay for productivity: Yi = γdi + (1 − γ) d

–

, where 0 < γ < 1.

Here, every worker’s pay is a weighted average of that individual’s own ability and the group’s average ability, where γ is the weight placed on individual ability.

Which of the preceding schemes leads to adverse self-selection into teams?

Which ones lead team members to prefer to admit only workers who are better than the team average?