Mathieu Faure : mathieu.faure[at]univ-amu.fr
Gaëtan Fournier : gaetan.fournier[at]univ-amu.fr
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 the agents 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 completed the project only after some exogenous delay. The main insight of the paper is that observation delays induce cyclical effort dynamics in equilibrium: Players alternate between periods in which they exert the maximal effort level and periods in which they make no effort at all. The size of the team has a negative impact on the average equilibrium effort, but a positive one 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.