2. Efficiency Wage Theory vs. Moral Hazard in Teams When workers' compensation depends on the team effort, it is possible that some works may choose to be the free riders, or to shirk. At the same time, efficiency wage theory or model, as practiced by Henry Ford, suggests that if the employer can sufficiently reward the workers, it is possible to lessen or eliminate the shirking problem in a team. Here, we are using a simple two-player game to test the theory. Assume that there are two workers, worker 1 and worker 2, in a team. Worker 1 can choose the effort level E1 = 1 (working hard) or E1 = 0 (shirking). Worker 2 can also choose E2 = 1 or E2 = 0. The reward to each worker is 2(E1 + E2). That is, each player or worker has two strategies - to work hard (with E =1) or to