We consider a situation in which a principal hires two agents whose cooperation is technically profitable and study three models that incorporate different assumptions about the agents' cooperative behavior. We find a close relationship between the agents' commitment capacity and the characteristics of the optimal contract. A greater capacity to cooperate leads to more efficient outcomes. We also show that unless agents form a team, the efficient level of mutual help is not achieved in equilibrium. © 1993.
|Journal||International Journal of Industrial Organization|
|Publication status||Published - 1 Jan 1993|