We show that demanding team incentives to be robust to nonquantifiable uncertainty about the game played by the agents leads to contracts that align the agents' interests. Such contracts have a natural interpretation as team‐based compensation. Under budget balance they reduce to linear contracts, thus identifying profit‐sharing, or equity, as an optimal contract absent a sink or a source of funds. A linear contract also gives the best profit guarantee to an outside residual claimant. These contracts still suffer from the free‐rider problem, but a positive guarantee obtains if and only if the technology known to the contract designer is sufficiently productive.

We consider the value of persistent information in strictly competitive situations, formalized as stochastic zero-sum games where only the maximizer ob-serves the state that evolves according to an ergodic Markov operator. We say that operator Q is better for the maximizer than operator P if the value of the game under Q is higher than under P regardless of the stage game. We show that this defines a partial order on the space of ergodic Markov operators, and provide a full characterization of this partial order. An i.i.d. state is the best case for the informed player; however, a perfectly persistent state is not necessarily the worst case. The analysis relies on a novel characterization of the value of a stochastic game with incomplete information. Our results can alternatively be interpreted as pertaining to the limit of the minmax value in repeated Bayesian games with Markov types. 1.

We study repeated Bayesian games with communication and observable actions in which the players' privately known payoffs evolve according to an irreducible Markov chain whose transitions are independent across players. Our main result implies that, generically, any Pareto-efficient payoff vector above a stationary minmax value can be approximated arbitrarily closely in a perfect Bayesian equilibrium as the discount factor goes to 1. As an intermediate step, we construct an approximately efficient dynamic mechanism for long finite horizons without assuming transferable utility.

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