We consider a team production problem in which the principal observes only the group output and not individual effort and in which the principal can only penalize an agent for poor performance if she has verifiable evidence that the agent in question did not fulfill his job assignment. In this...

We consider a model of team production in which the principal observes only the team output, but agents can monitor one another (at a cost) and provide reports to the principal. We consider the problem faced by a principal who is prevented from penalizing an agent without evidence showing that...