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Conflicting tasks and moral hazard: Theory and experimental evidence

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  • Hoppe, Eva I.
  • Kusterer, David J.

Abstract

We study a multi-task principal-agent problem in which tasks can be in direct conflict with each other. In theory, it is difficult to induce a single agent to exert efforts in two conflicting tasks, because effort in one task decreases the success probability of the other task. We have conducted an experiment in which we find strong support for the relevance of this incentive problem. In the presence of conflict, subjects choose two efforts significantly less often when both tasks are assigned to a single agent than when there are two agents each in charge of one task.

Suggested Citation

  • Hoppe, Eva I. & Kusterer, David J., 2011. "Conflicting tasks and moral hazard: Theory and experimental evidence," European Economic Review, Elsevier, vol. 55(8), pages 1094-1108.
  • Handle: RePEc:eee:eecrev:v:55:y:2011:i:8:p:1094-1108
    DOI: 10.1016/j.euroecorev.2011.04.005
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    Citations

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    Cited by:

    1. Hoppe, Eva I. & Kusterer, David J., 2011. "Behavioral biases and cognitive reflection," Economics Letters, Elsevier, vol. 110(2), pages 97-100, February.
    2. Schmitz, Patrick W., 2013. "Job design with conflicting tasks reconsidered," European Economic Review, Elsevier, vol. 57(C), pages 108-117.
    3. Pi, Jiancai, 2014. "Job design with sequential tasks and outcome externalities revisited," Economics Letters, Elsevier, vol. 125(2), pages 274-277.
    4. Schmitz, Patrick W., 2013. "Public procurement in times of crisis: The bundling decision reconsidered," Economics Letters, Elsevier, vol. 121(3), pages 533-536.

    More about this item

    Keywords

    Moral hazard; Conflicting tasks; Experiment;

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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