This paper analyzes the problem of inducing the members of an organization to behave as if they formed a team. Considered is a conglomerate-type organization consisting of a set of semi-autonomous subunits that are coordinated by the organization's head. The head's incentive problem is to choose a set of employee compensation rules that will induce his subunit managers to communicate accurate information and take optimal decisions. The main result exhibits a particular set of compensation rules, an optimal incentive structure, that leads to team behavior. Particular attention is directed to the informational aspects of the problem. An extended example of a resource allocation model is discussed and the optimal incentive structure is interpreted in terms of prices charged by the head for resources allocated to the subunits.

[This paper presents a general equilibrium model in which private commodities are allocated through competitive markets and public commodities according to government allocation and taxing rules that depend on information communicated to the government by consumers regarding their preferences. A wide range of strategic behavior for consumers in their communication with the government is allowed; in particular, consumers may understate their preferences and be "free riders" if they choose. Although several examples of allocation-taxation schemes falling within the general model are discussed, the major contribution of the paper is the formulation of a particular government allocation-taxation scheme for which the behavioral equilibria are Pareto optimal. That is, given the government rules, consumers find it in their self-interest to reveal their true preferences for public goods.]

In our previous paper, "Optimal Allocation of Public Goods...," (1977) we presented a mechanism for determining efficient public goods allocations when preferences are unknown and consumers are free to misrepresent their demands for public goods. We proved the basic welfare theorem for this model: If consumers are competitive in markets for private goods and follow Nash behavior in their choice of demands to report to the mechanism, then equilibria will be Pareto optimal. In this paper we show this result is not vacuous by proving that an equilibria will be Pareto optimal. In this paper we show this result is not vacuous by proving that an equilibrium will exist for a wide class of economies. Our conditions are slightly stronger than those required to prove the existence of a Lindahl equilibrium. In order to rule out the possibility of bankruptcy, we assume additionally that at all Pareto optimal allocations, private goods consumption is bounded away from zero.

[This paper studies efficient resource allocation in a team consisting of a large number of firms and a resource allocator. We examine procedures based on a single demand message from the firms calculated using local information only. Our main result shows that for appropriately calculated demands, if firms are given (or "Grab") exactly what they demand until resources are exhausted and thereafter nothing, the per firm output converges, as the number of firms increases, to the maximal output obtainable using any decision rule including fully optimal ones requiring a complete exchange of all information. A similar result is also shown under stronger convexity conditions for demand messages defined by profit-maximizing under a (generally non-equilibrium) price system.]