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Task assignment under agent loss aversion

  • Daido, Kohei
  • Morita, Kimiyuki
  • Murooka, Takeshi
  • Ogawa, Hiromasa

We analyze a task-assignment model in which a principal assigns a task to one of two agents depending on future states. If the agents have concave utility, the principal assigns the task to them contingent on the state. We show that if the agents are loss averse, a state-independent assignment–assigning the task to a single agent in all states–can be optimal even when the principal can write a contingent contract at no cost.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176513003224
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 121 (2013)
Issue (Month): 1 ()
Pages: 35-38

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Handle: RePEc:eee:ecolet:v:121:y:2013:i:1:p:35-38
DOI: 10.1016/j.econlet.2013.06.040
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1133-1165.
  2. Herweg, Fabian & Mierendorff, Konrad, 2013. "Uncertain Demand, Consumer Loss Aversion, and Flat-Rate Tariffs," Munich Reprints in Economics 19420, University of Munich, Department of Economics.
  3. Gill, David & Stone, Rebecca, 2010. "Fairness and desert in tournaments," Games and Economic Behavior, Elsevier, vol. 69(2), pages 346-364, July.
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  8. Botond Koszegi & Matthew Rabin, 2006. "Reference-Dependent Risk Attitudes," Levine's Bibliography 122247000000001267, UCLA Department of Economics.
  9. Kohei Daido & Hideshi Itoh, 2007. "The Pygmalion and Galatea Effects: An Agency Model with Reference-Dependent Preferences and Applications to Self-Fulfilling Prophecy," Discussion Paper Series 35, School of Economics, Kwansei Gakuin University, revised Sep 2007.
  10. Botond Kőszegi & Paul Heidhues, 2008. "Competition and Price Variation When Consumers Are Loss Averse," American Economic Review, American Economic Association, vol. 98(4), pages 1245-68, September.
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  13. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  14. Daido, Kohei & Morita, Kimiyuki & Murooka, Takeshi & Ogawa, Hiromasa, 2013. "Task assignment under agent loss aversion," Economics Letters, Elsevier, vol. 121(1), pages 35-38.
  15. Kohei Daido & Takeshi Murooka, 2011. "Team Incentives and Reference-Dependent Preferences," Discussion Paper Series 70, School of Economics, Kwansei Gakuin University, revised May 2011.
  16. Fabian Herweg & Daniel Müller & Philipp Weinschenk, 2010. "Binary Payment Schemes: Moral Hazard and Loss Aversion," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_38, Max Planck Institute for Research on Collective Goods.
  17. Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 1-48.
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