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Task-Specific Abilities in Multi-Task Agency Relations

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  • Thiele, Veikko

Abstract

This paper analyzes a multi-task agency framework where the agent exhibits task-specific abilities. Besides investigating the appendant consequences of applying incongruent performance measures in incentive contracts, this paper demonstrates how the provision of incentives - including the optimal aggregation of information - takes the agent's task-specific abilities into consideration. It further emphasizes the relation between job characteristics and the principal's preference for selecting specific agents. This paper essentially demonstrates that differences in task-specific abilities across agents can provide a supplementary explanation of why they are allocated to various jobs; or why they receive different incentive contracts, even if their jobs are identical.

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File URL: http://mpra.ub.uni-muenchen.de/7403/
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Bibliographic 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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References

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  1. 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.
  2. Schnedler, Wendelin, 2003. "On the Prudence of Rewarding A While Hoping for B," IZA Discussion Papers 765, Institute for the Study of Labor (IZA).
  3. Rees, Ray, 1985. "The Theory of Principal and Agent: Part 2," Bulletin of Economic Research, Wiley Blackwell, vol. 37(2), pages 75-95, May.
  4. Espen R. Moen & Asa Rosén, 2005. "Performance Pay and Adverse Selection," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 279-298, 06.
  5. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  6. George Baker, 2000. "The Use of Performance Measures in Incentive Contracting," American Economic Review, American Economic Association, vol. 90(2), pages 415-420, May.
  7. 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.
  8. 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.
  9. George Baker, 2002. "Distortion and Risk in Optimal Incentive Contracts," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 728-751.
  10. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  11. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  12. 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.
  13. Rees, Ray, 1985. "The Theory of Principal and Agent: Part 1," Bulletin of Economic Research, Wiley Blackwell, vol. 37(1), pages 3-26, January.
  14. Robert Gibbons & Michael Waldman, 2004. "Task-Specific Human Capital," American Economic Review, American Economic Association, vol. 94(2), pages 203-207, May.
  15. Robert Gibbons, 1998. "Incentives in Organizations," NBER Working Papers 6695, National Bureau of Economic Research, Inc.
  16. 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.
  17. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  18. Beth J. Asch, 1990. "Do incentives matter? The case of Navy recruiters," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 89-106, February.
  19. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May.
  20. Harry J. Paarsch & Bruce S. Shearer, 1999. "The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 643-667.
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Cited by:
  1. Thiele, Veikko, 2007. "Performance measurement in multi-task agencies," Research in Economics, Elsevier, vol. 61(3), pages 148-163, September.

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