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Conflicting Tasks and Moral Hazard: Theory and Experimental Evidence

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  • Eva I. Hoppe

    ()
    (Department of Economics, University of Cologne)

  • David J. Kusterer

    ()
    (Department of Economics, University of Cologne)

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

Paper provided by Cologne Graduate School in Management, Economics and Social Sciences in its series Cologne Graduate School Working Paper Series with number 01-04.

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Date of creation: 24 Aug 2010
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Handle: RePEc:cgr:cgsser:01-04

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Keywords: moral hazard; conflicting tasks; experiment;

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References

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Cited by:
  1. Schmitz, Patrick W, 2013. "Public Procurement in Times of Crisis: The Bundling Decision Reconsidered," CEPR Discussion Papers 9676, C.E.P.R. Discussion Papers.
  2. Schmitz, Patrick W., 2013. "Job design with conflicting tasks reconsidered," European Economic Review, Elsevier, vol. 57(C), pages 108-117.
  3. Eva I. Hoppe & David J. Kusterer, 2010. "Behavioral biases and cognitive reflection," Cologne Graduate School Working Paper Series 01-03, Cologne Graduate School in Management, Economics and Social Sciences.

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