Birds of a Feather: Teams as a Screening Mechanism

This paper studies the informational content of elective teams in a dynamic agency framework with adverse selection. Two agents with di erent employment histories are paid their conditional expected marginal product. They observe their types (good or bad), and choose between working together or separately. We characterize the distributions on agents' types, nature and wages such that teams are formed exclusively by good-type agents, with and without side payments. As employment records matter when idiosyncratic contributions are di cult to isolate, a good-type agent prefers not to jeopardize his reputation by teaming up with a bad-type agent.