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A Multitask Model Without Any Externalities

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  • Meg Sato

    ()
    (The Australian National University (ANU) - Crawford School of Public Policy)

  • Kazuya Kamiya

    (University of Tokyo - Faculty of Economics)

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    Abstract

    This paper shows that offering a fixed wage maximizes the principal's welfare when the agent needs to engage in multitask and that the effort needed to achieve one task can be induced by suppressing the effort needed for the other task, in the absence of externalities. In the existing literature, it is argued that these results are obtained because externalities exist between the costs of tasks or production of tasks. The former is typically represented by a perfect substitute in the cost function. In this paper, we demonstrate that if the agent is engaged in multitask in which one task produces verifiable output and the other task produces unverifiable output, the same results are obtained without externalities.

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    File URL: http://www.crawford.anu.edu.au/pdf/crwf_ssrn/crwfrp_1106.pdf
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    Bibliographic Info

    Paper provided by Crawford School of Public Policy, The Australian National University in its series Crawford School Research Papers with number 1106.

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    Length: 21 pages
    Date of creation: Jul 2011
    Date of revision:
    Handle: RePEc:een:crwfrp:1106

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    Web page: https://crawford.anu.edu.au/research/crwf_ssrn/
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    Related research

    Keywords: Multitask; Unverifiable Outputs; Unverifiable Investments;

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    1. Nobuo Akai & Keizo Mizuno & Hiroshi Osano, 2010. "Incentive Transfer Schemes with Marketable and Nonmarketable Public Services," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(4), pages 614-640, December.
    2. Edlin, Aaron S & Reichelstein, Stefan, 1996. "Holdups, Standard Breach Remedies, and Optimal Investment," American Economic Review, American Economic Association, vol. 86(3), pages 478-501, June.
    3. Itoh, Hideshi, 1992. "Cooperation in Hierarchical Organizations: An Incentive Perspective," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(2), pages 321-45, April.
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