Peer Effects and the Structure of Teams

Topic:

Peer Effects and the Structure of Teams

Time&Date: 

 15:00-16:15 pm, 2019/10/11 (Friday)

Venue:

  Room 619, Teaching A

Speaker:

Prof. Bin Chen (Sun Yat-Sen University)

Evidence for positive peer effects in production has been well-documented in empirical studies, and these effects are found to be more significant in teams composed of members with heterogeneous abilities. By modelling peer effect as mutual monitoring between members, we show that the total agency cost is minimized by maximizing skill diversities in the teams. This result provides a novel explanation for why worker heterogeneity can strengthen peer effects. Given any pool of agents, the optimal job and team design involve assigning agents with extreme abilities into teams using negative sorting, while leaving agents with intermediate abilities to work independently.