No. 218: Team Formation with Altruism

This paper explores the strategic formation of teams within organizations with moral hazard, focusing on the impact of agents‘ altruism on incentive structures. The study contrasts teams composed of agents with similar preferences with teams that integrate diverse preferences. The analysis demonstrates that, for N identical projects and 2N agents, the principal’s optimal strategy is to form antiassortative teams: pairing the most and least altruistic agents, then repeating the process with the remaining agents and so forth. This research highlights the importance of aligning agent preferences with strategic team formation to optimize organizational costs.