Scale economies, consistent conjectures and teams

Mcginty, Matthew and Heywood, John (2012) Scale economies, consistent conjectures and teams. Economics Letters, 117 (3). pp. 566-568. ISSN 0165-1765

Abstract

This paper models the behavior of team members in a consistent conjectures equilibrium. When subject to scale economies, team members produce more than Nash and when subject to scale diseconomies, they produce less than Nash. Moreover, even when effort levels of team members are perfect substitutes in production, they can be strategic complements in the face of scale economies. Finally, with sufficient scale economies, the complementarity eliminates free-riding and the team optimum is obtained.