Collective Contracting for Coordinati on
Abstract:
The success of a team project requires multiple agents to participate and exert effort. Beyond the classical single-agent moral hazard problem, strategic complementarity introduces two sources of strategic risk: agents may shirk because they fear others will shirk, or decline to participate be cause they fear others will not join. A principal seeks to design contracts that guarantee full participation and effort. We introduce collective contracts, under which each agent's reward depends not only on the pro ject outcome but also on the participation profile. We show that, under the optimal collective contract, the principal can implement her desired outco me without paying any incentive rent associated with strategic risk. The tw o sources of strategic risk are resolved by two distinct mechanisms: a suff iciently attractive outside option triggers forward-induction reasoning, en suring that any agent who accepts the contract must exert effort; and condi tioning rewards on the participation profile guarantees participation as th e collective contract protects each agent's outside option even if others r eject the contract. The optimal collective contract takes the form of an al l-or-nothing mechanism, under which any single agent's rejection effectivel y voids the participation of the others. We further compare our findings wi th Winter (2004) and Halac, Lipnowski, and Rappoport (2021), and discuss ap plications including syndicated loans and venture-capital fundraising.
DTSTAMP:20260711T070019Z DTSTART:20260714T130000Z DTEND:20260714T140000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR