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Task-Specific Abilities in Multi-Task Agency Relations

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Author Info
Thiele, Veikko

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Abstract

This paper analyzes a multi-task agency framework where the agent exhibits task-specific abilities. It illustrates how incentive contracts account for the agent's task-specific abilities if contractible performance measures do not reflect the agent's contribution to firm value. This paper further sheds light on potential ranking criteria for performance measures in multi-task agencies. It demonstrates that the value of performance measures in multi-task agencies cannot necessarily be compared by their respective signal/noise ratios as in single-task agency relations. It is rather pivotal to take the induced effort distortion and measure-cost efficiency into consideration -- both determined by the agent's task specific abilities.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2470.

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Date of creation: 16 Feb 2007
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Handle: RePEc:pra:mprapa:2470

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Related research
Keywords: Task-specific human capital; performance measurement; distortion; multi-task agencies; congruence; incentives;

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June. [Downloadable!] (restricted)
  2. Robert Gibbons & Michael Waldman, 2004. "Task-Specific Human Capital," American Economic Review, American Economic Association, vol. 94(2), pages 203-207, May. [Downloadable!]
  3. Espen R. Moen & Asa Rosén, 2005. "Performance Pay and Adverse Selection," Scandinavian Journal of Economics, Blackwell Publishing, vol. 107(2), pages 279-298, 06. [Downloadable!] (restricted)
    Other versions:
  4. Lindbeck, Assar & Snower, Dennis J, 2000. "Multitask Learning and the Reorganization of Work: From Tayloristic to Holistic Organization," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 353-76, July. [Downloadable!] (restricted)
    Other versions:
  5. Beth J. Asch, 1990. "Do incentives matter? The case of Navy recruiters," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 43(3), pages 89-106, February.
  6. Wendelin Schnedler, 2003. "On the Prudence of Rewarding A While Hoping for B," The Centre for Market and Public Organisation 03/067, Department of Economics, University of Bristol, UK. [Downloadable!]
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  7. Rees, Ray, 1985. "The Theory of Principal and Agent: Part 2," Bulletin of Economic Research, Blackwell Publishing, vol. 37(2), pages 75-95, May.
  8. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
  9. Robert Gibbons, 1998. "Incentives in Organizations," NBER Working Papers 6695, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Gibbons, Robert, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-32, Fall. [Downloadable!] (restricted)
  11. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May. [Downloadable!] (restricted)
  12. George Baker, 2000. "The Use of Performance Measures in Incentive Contracting," American Economic Review, American Economic Association, vol. 90(2), pages 415-420, May. [Downloadable!] (restricted)
  13. Brickley, James A. & Zimmerman, Jerold L., 2001. "Changing incentives in a multitask environment: evidence from a top-tier business school," Journal of Corporate Finance, Elsevier, vol. 7(4), pages 367-396, December. [Downloadable!] (restricted)
  14. Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring. [Downloadable!] (restricted)
  15. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
  16. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 881-919, November. [Downloadable!] (restricted)
  17. Rees, Ray, 1985. "The Theory of Principal and Agent: Part 1," Bulletin of Economic Research, Blackwell Publishing, vol. 37(1), pages 3-26, January.
  18. Robert Gibbons & Michael Waldman, 1999. "A Theory Of Wage And Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1321-1358, November. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Thiele, Veikko, 2007. "Performance Measurement in Multi-Task Agencies," MPRA Paper 2469, University Library of Munich, Germany. [Downloadable!]
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