Moral hazard and reputational concerns in teams: Implications for organizational choice

I study how and to what extent market reputation controls moral hazard in the presence of joint production. I characterize the nature of free-riding and the dependence of an agent's reputational concerns on his partner's characteristics as well as his own. Using these results, I address two organizational issues: grouping agents in teams and sharing team output among agents. The main implications are the advantage of mixing young and old employees and the optimality of equal sharing in terms of market incentive provision.