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Conflicting tasks and moral hazard: Theory and experimental evidence

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  • Hoppe, Eva I.
  • Kusterer, David J.

Abstract

We study a multi-task principal-agent problem in which tasks can be in direct conflict with each other. In theory, it is difficult to induce a single agent to exert efforts in two conflicting tasks, because effort in one task decreases the success probability of the other task. We have conducted an experiment in which we find strong support for the relevance of this incentive problem. In the presence of conflict, subjects choose two efforts significantly less often when both tasks are assigned to a single agent than when there are two agents each in charge of one task.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 55 (2011)
Issue (Month): 8 ()
Pages: 1094-1108

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Handle: RePEc:eee:eecrev:v:55:y:2011:i:8:p:1094-1108

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Web page: http://www.elsevier.com/locate/eer

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Keywords: Moral hazard; Conflicting tasks; Experiment;

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Cited by:
  1. Schmitz, Patrick W., 2013. "Public procurement in times of crisis: The bundling decision reconsidered," Economics Letters, Elsevier, vol. 121(3), pages 533-536.
  2. Schmitz, Patrick W., 2012. "Job design with conflicting tasks reconsidered," MPRA Paper 36914, University Library of Munich, Germany.
  3. Hoppe, Eva I. & Kusterer, David J., 2011. "Behavioral biases and cognitive reflection," Economics Letters, Elsevier, vol. 110(2), pages 97-100, February.

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