Observation delays in teams and effort cycles

Abstract

This paper studies the dynamics of effort provision in teams when there are exogenous observation delays between partners. Agents are engaged in a common project whose duration is uncertain and yields no benefit until one of them has completed it. All it takes to complete the project is one success, which can be obtained after the investment of costly effort. An agent learns immediately when he succeeds but learns whether his partners succeeded after some delay. In equilibrium, players alternate between periods in which they exert the maximal effort and periods in which they make no effort at all. Better information transmission leads to shorter and more frequent rest periods. The size of the team has a positive impact on the players' payoff. Finally, introducing a small observation delay increases the average effort of patient players and makes them complete the project faster in expectation.