Mixed incentive contracts in partnerships

This paper illustrates the impact of mixed contracts on teamwork and welfare in a partnership when production depends on the efforts of agents in their own tasks as well as their efforts in helping other teammates. We show that a mixed contract that combines compensation based on team output with that of a tournament based on individual output leads to higher welfare than a purely team-output-based contract, despite the possibility of sabotage and the possible adverse impacts that the contract may have on the allocation of agent efforts.