Rational Sabotage in Cooperative Production with Heterogeneous Agents

We present a model of cooperative production in which rational agents might carry out sabotage activities that decrease output. We provide necessary and sufficient conditions for the existence of a Nash equilibrium without sabotage. It is shown that the absence of sabotage in equilibrium depends on the interplay between technology, relative productivity of agents and the degree of meritocracy. In particular we show that, ceteris paribus, meritocratic systems give more incentives to sabotage than egalitarian systems.