Misaligning Incentives in Teams : Unique Implementation with Optimal Monitoring

In a multi-agent setting, we study the optimal design of the monitoring and compensation scheme to uniquely implement work when a limited number of contractible messages are available. When only two messages can be used, the optimal incentive contract features two sub-teams competing for a bonus. Infra-firm competition allows workers to have more impact on their remuneration, implying that lower expected wages are required to incentivize effort. With more than two messages, more sophisticated ways to misalign workers’ incentives can be used to extract the full surplus from a team of workers growing exponentially in the number of available messages