Matching to Produce Information

We study endogenous team formation inside research organizations through the lens of a one-sided matching model with non-cooperative after-match information production. We show that equilibrium sorting of workers into teams may be inefficient. Inefficiency arises from two sources: asymmetric effort of workers within teams and heterogeneous team-specific productivities. Asymmetric effort inefficiency occurs when a productive team is disrupted by a worker who chooses to join a less productive team because there is an equilibrium played inside that team in which she exerts relatively less effort. Stratification inefficiency occurs when a productive team forms, but generates a significant negative externality on the productivity of other teams. We show that management can eliminate asymmetric effort inefficiency by centralizing the assignment of roles within teams, while stratification inefficiency is a robust phenomenon that can only be eliminated by assigning workers to teams.

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