TEAMS, REPEATED TASKS, AND IMPLICIT INCENTIVES

In a team setting, wherein only group performance is tracked, we show that muted incentive contracts may be sufficient to motivate team memb ers. By having the team repeat a task, explicit (contractual) incentiv es can be substituted by implicit incentives team members provide to e ach other. We also study an example in which, despite uncorrelated ind ividual performance measures being available, it is optimal to conditi on each manager's pay on both managers' performance. This can be viewe d as creating a group performance measure. Using a group performance m easure provides each manager with incentives to monitor and a means of punishing other managers.