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Task-specific abilities in multi-task principal-agent relationships

  • Thiele, Veikko

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 multidimensional contribution to firm value. This paper further sheds light on potential ranking criteria for performance measures in multi-task principal-agent relationships. It demonstrates that performance measures in multi-task agencies cannot necessarily be compared by their respective signal-to-noise ratio as in single-task agency relationships. In fact, it is indispensable to take the induced effort distortion and the measure-cost efficiency into consideration--both determined by the agent's task-specific abilities.

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File URL: http://www.sciencedirect.com/science/article/pii/S0927-5371(09)00151-1
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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 4 (August)
Pages: 690-698

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Handle: RePEc:eee:labeco:v:17:y:2010:i:4:p:690-698
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
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