The effects of optimism bias in teams
This article imports a behavioural perspective into a team context to study the effort-coordination problem among agents. Specifically, we investigate how the presence of optimism bias impacts the severity of the free-rider problem, the organizational structure of the team and the compensation contracts offered to agents in equilibrium. The results indicate that all agents become more reluctant to exert effort and the team welfare decreases when some of its agents are optimistic, suggesting that optimism aggravates the free-rider problem in teams. Appointing a team leader makes all agents work harder, and the team benefits more by having the optimistic agent as its leader. These findings are in sharp contrast to the effects of overconfidence as identified in the literature. It is advisable to pay the optimistic agents less than the rational agents. Encouragingly, optimistic agents can learn about their own bias in the long run, leaving their team without too much detriment of optimism.
Year of publication: |
2014
|
---|---|
Authors: | Wang, Jian ; Zhuang, Xintian ; Yang, Jun ; Sheng, Jiliang |
Published in: |
Applied Economics. - Taylor & Francis Journals, ISSN 0003-6846. - Vol. 46.2014, 32, p. 3980-3994
|
Publisher: |
Taylor & Francis Journals |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
The effects of optimism bias in teams
Wang, Jian, (2014)
-
Optimism bias and incentive contracts in portfolio delegation
Wang, Jian, (2013)
-
Asymmetric contracts, cash flows and risk taking of mutual funds
Sheng, Jiliang, (2014)
- More ...