Holmstrom (1982) considered a group of agents who jointly produce some output and showed that if the agents are required to balance the budget then the first best, or Pareto efficient, allocation cannot be obtained as an equilbrium relative to any sharing rule. Recent research on risk-neutral...

We analyse the production of knowledge in research teams. Individuals put in effort, which is not enforcable. Effort increases the probability of a successful outcome. Research with enforcable effort displays increasing returns to scale; these scale economies are limited, or even reversed, by the...