Collaborative Work Dynamics in Projects with Co‐Production

Many knowledge-intensive projects such as research and development, high technology, and management and information technology consulting involve co-production between a client and a vendor. Yet, the decisions on "who" should work and "when" can often be made independently by the client or the vendor, and revised on the fly. In this paper, we consider a project with co-production that has a finite deadline and benefits for early completion. We characterize the collaborative work dynamics between a vendor and a client and show how they are affected by contractual arrangements. We show that, when efforts are verifiable, the client and the vendor should both work when not enough progress has been made and the deadline is close, or conversely, when so much progress has been made and there is still plenty of time left until the deadline; otherwise, only one of them should work. Moreover, when efforts are not observable, only the latter collaboration phase can be sustained in equilibrium under simple contracts such as fixed fee or time-and-materials, because the deadline has a negative impact on the vendor's work incentives. Overall, our analysis suggests that, although most project work planning tools assume a constant work rate, actual work dynamics evolve in a predictable fashion as the project unfolds and can easily be accounted for at the project planning stage.