Transparency and Disclosures in Teams

Abstract

This thesis explores the incentive effects of transparency in two variants of a two-player multi-task joint project. The first two chapters analyze a two-round effort investment game where (i) task success is determined by a player's overall contribution, and (ii) transparency involves the observability of efforts at an interim stage. In a discrete efforts model, under a general complementary production technology transparency dominates non-transparency by achieving at least as much, and sometimes more, collective and individual efforts relative to non-transparency, and eliminates the inferior equilibria in multiple equilibrium situations. This benefit of transparency is demonstrated both for exogenous rewards and in terms of implementation costs (with rewards optimally chosen by a principal to induce full cooperation). If, on the other hand, players' efforts are substitutes, transparency makes no difference to equilibrium efforts. With continuous efforts exhibiting increasing marginal costs, under perfect substitution technology transparency becomes harmful by strictly lowering efforts.

In the third chapter, (i) task success is realized at the end of the first round, where the second round offers a chance for an unsuccessful player to make a second attempt, (ii) efforts are completely observable, and (iii) transparency involves the disclosure of first-round outcomes. Significant complementarities exist between players' individual tasks. Disclosure, by allowing players to motivate others into continued activities through revelation of interim progress, is beneficial if costs are sufficiently high. With low enough costs of effort, disclosure dampens incentives to exert effort.