Template-Type: ReDIF-Paper 1.0 
Author-Name: Carlos Segura-Rodriguez
Author-Name-First: Carlos
Author-Name-Last: Segura-Rodriguez
Author-Email: segurarc@bccr.fi.cr
Author-Workplace-Name: Department of Economic Research, Central Bank of Costa Rica
Author-Name: Ashwin Kambhampati
Author-Name-First: Ashwin
Author-Name-Last: Kambhampati
Author-Email: akambh@sas.upenn.edu
Author-Workplace-Name: Deparment of Economics, University of Pennsylvania
Title: The Optimal Assortativity of Teams Inside the Firm
Abstract: How does a profit-maximizing manager form teams and compensate workers in the presence of both adverse selection and moral hazard? Under complete information, it is well known that any complementarity in characteristics implies that positive assortative matching is productively efficient. But, under asymmetric information, we uncover the problem of disassortative incentives: incentive costs may increase in assortativity. Profit maximization thus prescribes either random or negative assortative matching, both productively inefficient, when complementarities are weak and effort costs are high enough. When this is the case, the manager may instead prefer to delegate matching, allowing workers to sort themselves into teams. Our results shed light on recent empirical work documenting patterns of non-assortative matching inside of firms.
Length: 61 pages 
Creation-Date: 2021-02
Publication-Status: Published  
File-URL: https://repositorioinvestigaciones.bccr.fi.cr/handle/20.500.12506/345
File-Format: Application/pdf 
Number: 2103
Classification-JEL: C78, D86, L23 
Keywords: Asymmetric Information; Assortative Matching; Delegation; Teams, Informacion asimetrica, Delegación, Equipos
Handle: RePEc:apk:doctra:2103