Moral Hazard in Teams

@article{Holmstrom1982MoralHI,
  title={Moral Hazard in Teams},
  author={Bengt Holmstrom},
  journal={The Bell Journal of Economics},
  year={1982},
  volume={13},
  pages={324-340}
}
This article studies moral hazard with many agents. The focus is on two features that are novel in a multiagent setting: free riding and competition. The free-rider problem implies a new role for the principal: administering incentive schemes that do not balance the budget. This new role is essential for controlling incentives and suggests that firms in which ownership and labor are partly separated will have an advantage over partnerships in which output is distributed among agents. A new… 
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