Contracting in teams with network technologies

Abstract

We develop a contracting model between the owner and the workers of a firm when production depends directly on a network of synergies among workers. We aim to answer how the owner of the firm uses the network structure to maximize profits. With this purpose, we analyze two contracting regimes: single wage and perfect discrimination. We find that individual network characteristics, as well as aggregate measures, affect profits and salaries. We also study the parameters for wich the incentives to discriminate and to account for the network structure are significant.