MORAL HAZARD IN REMOTE TEAMS

We reexamine the ability of teams to credibly self-impose group punishments and prevent free riding when individual inputs are unobservable. We formulate self-imposed group punishments as performance underreporting by the team. Although underreporting is not credible in a static game, we show that simple strategies can sustain underreporting in a repeated game, and that the threat of underreporting improves welfare only if team members' preferences between shirking and team output consumption are nonseparable. Our results suggest that self-assessments can replace increased managerial monitoring in remote work environments.