Research

Dr Constantine Sorokin, Adam Smith Business School

"Adverse Selection in Teams"
Friday, 15 May. 13:00
Room 141ab ASBS

Abstract

We study a multi-agent contracting problem with both moral hazard and adverse selection, extending Winter's (2004) work on incentives and discrimination. A team of agents works on a project whose outcome is observable and contractible, whereas individual effort is not. Agents' efforts are complementary, and each agent privately observes an effort cost that is unknown to the principal and to the other agents. The principal seeks an outcome-contingent reward scheme that induces full effort in every Bayesian equilibrium and minimises expected payments among all schemes with that property. Our main finding is that adverse selection can partially mitigate moral hazard. In particular, the combination of complementarity and uncertainty can support full implementation with equal wages, whereas in Winter's (2004) benchmark, complementarity alone leads to discriminatory contracts. In the two-player case, we characterise the boundary between symmetric and asymmetric optimal contracts and compare the incomplete-information optimum with the complete-information benchmark, showing that hidden effort costs can benefit the principal. We also consider extensions to many-player environments and non-uniform cost distributions; in the many-player uniform benchmark, we compare the best symmetric incomplete-information contract with the ex post complete-information benchmark.

Authors: Constantine Sorokin (Adam Smith Business School) and Eyal Winter (The Hebrew University of Jerusalem and Lancaster University)

Bio

Constantine Sorokin joined the University of Glasgow Adam Smith Business School in 2019 as a Lecturer of Economics. He holds both an undergraduate and a PhD degree in mathematics from Lomonosov Moscow State University. From 2010 to 2018, Constantine worked as an Assistant/Associate Professor at the National Research University Higher School of Economics, Moscow, Russia. Constantine’s research interests are focused on game theory, both from mathematical and economic perspectives.

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First published: 6 May 2026