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Li, Jianpei (May 2007): Efficient Inequity–Averse Teams. SFB/TR 15 Discussion Paper No. 210 [PDF, 213kB]


This paper analyzes the efficiency of team production when agents exhibit other regarding preferences. It is shown that full efficiency can be sustained as an equilibrium through a budget-balancing mechanism that punishes some randomly chosen agents if output falls short of efficient level but distributes the output equally otherwise, provided that the agents are sufficiently inequity averse.

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