Equal, proportional, and mixed sharing of cooperative production under the threat of sabotage

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Abstract

This paper analyzes the consequences of a parametrized class of sharing rules on the propensity of individuals to sabotage each other in a cooperative production framework. The considered sharing rules include equal and proportional sharing as special cases and are parametrized with respect to their sensitivity to relative input contributions. This parameter affects the equilibrium provision of productive individual labor (that increases the respective individual input contribution) but also the propensity to sabotage others (which decreases the input contributions of sabotaged individuals). The theoretical analysis shows that sharing rules in which more weight is put on equal sharing induce zero sabotage in equilibrium; however, they might also lead to inefficient underproduction. In contrast, sharing rules that are highly sensitive with respect to relative input contributions lead to destructive sabotage activities and moreover to inefficient overproduction.

Original languageEnglish
Pages (from-to)253-273
Number of pages21
JournalJournal of Economics
Volume113
Issue number3
DOIs
Publication statusPublished - 18 Oct 2014

Keywords

  • Cooperative production
  • Sabotage
  • Sharing rules

ASJC Scopus subject areas

  • Economics and Econometrics
  • Business, Management and Accounting(all)

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