Managing Automation in Teams

49 Pages Posted: 14 Sep 2017 Last revised: 23 Sep 2018

See all articles by Mustafa Dogan

Mustafa Dogan

MIT Sloan School of Management

Pinar Yildirim

University of Pennsylvania - The Wharton School

Date Written: September 12, 2017


Studying factors that influence adoption of new products and technologies lies at the heart of marketing. In this paper, we study a manager's decision to adopt automation for a production process. Automation offers efficiency by generating consistent high input at low operating costs. But at the same time, it reduces the interaction among employees and reduces a manager's ability to take advantage of employees' peer monitoring capacity. We study how automating some tasks in a production process influences the effort of the employees working on the same process, and whether and when a manager should choose to automate the production process. Comparing the costs of an automated production system to one that is not, we show that while automation provides significant cost-cutting benefits, it may still result in an overall costlier system because of the increase in the cost of incentivizing the remaining employees. We show that as some tasks in production can be automated and automation becomes gradually more cost-efficient, human teams are less likely to be employed under cooperative contracts which reward an employee for his peer's achievement, but rather under competitive contracts which reward an employee for achievements better than his peer.

Keywords: Automation, Teams, Compensation Contracts, Game Theory

JEL Classification: E2, C7, L6, D8

Suggested Citation

Dogan, Mustafa and Yildirim, Pinar, Managing Automation in Teams (September 12, 2017). Available at SSRN: or

Mustafa Dogan

MIT Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States


Pinar Yildirim (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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