Deadlines and Distractions
AbstractWe consider a principal-agent model in which a task, demanding a sequence of efforts by the agent, must be completed by a certain date. Effort is not contractible. Agents are subject to shocks affecting their opportunity cost of time such that they are distracted from work when the opportunity cost of time is high. We show that the probability that a task is completed by the deadline is a non-monotonic function of the agent’s probability of being distracted. The anticipation of future distractions induces rational agents to get started earlier for precautionary reasons. As a result, agents who are more often distracted may outperform agents who are distracted less often. Principals can increase the probability that the task is completed, and thus achieve higher profits, by strategically setting "tight" deadlines, provided that these can later be extended with a positive probability.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 347.
Date of creation: Dec 2007
Date of revision:
Deadlines; time-consistency; timing of effort; optimal incentives.;
Other versions of this item:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- M50 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - General
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