ECON5323 Organisational Economics
Teamwork questions 1
1. Consider a principal-agent scenario in which the instructor is the principal and the students are
agents. Suppose the principal is interested in maximising a measure called “learning”, which is
costly for the students. Further suppose that the instructor is “mean”, i.e. he doesn’t like to give
out marks.
(a) Suppose “learning” is not observable, but is perfectly measurable by a variable that is
observable: “class attendance”. What can the instructor do to incentivise learning?
(b) Realistically, “learning” is not observable, but “class attendance” (while being observable) isn’t a
very good measure of “learning”. Name one behavior that 1) is rewarded by incentivising
attendance and 2) the principal does not care about.
(c) Name one behavior that contributes to “learning” that is not “captured” by a performance measure
linked to attendance.
(d) We assumed that giving out marks is somehow “costly” for the instructor. Explain how the
analysis in a-c changes if it is not.
2. Put yourself in the shoes of an instructor (the principal) who assigns a group essay. The principal
cares about maximising 1) how well-written the final submissions are 2) to what extent the essay is
written “as a team” and he cares about minimising time spent marking. Discuss the pros and cons
of two of the following marking schemes in meeting the principal’s three objectives. Also, suggest
another marking scheme not listed here, and evaluate it based on the same criteria.
(a) Each student gets a mark corresponding to the worst part of the essay.
(b) Each student gets a mark corresponding to the best part of the essay.
(c) Each student indicates to the instructor which part they wrote, and gets an individual mark
based on the quality of that part.
(d) To determine the mark of each student, the instructor randomly chooses a passage from the essay
and gives the student a mark corresponding to the quality of that part.