Matching to Produce Information: A Model of Self-Organized Research Teams

Abstract

In recent decades, research organizations have brought the “market inside the firm” by allowing workers to sort themselves into teams. How do research teams form absent a central authority? We introduce a model of team formation in which workers first match and then non-cooperatively produce correlated signals about an unknown state. We uncover a novel form of moral hazard: an efficient team of workers producing complementary signals may be disrupted if one of its members can form an inefficient team in which she exerts less effort. This inefficiency rationalizes targeted management interventions which designate specific workers as “project leaders” with more assumed responsibilities.