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Task scheduling and moral hazard

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  • Tymofiy Mylovanov

    ()

  • Patrick Schmitz

    ()

Abstract

We study a two-period moral hazard problem with risk-neutral and wealth-constrained agents and three identical tasks. We show that the allocation of tasks over time is important if there is a capacity constraint on the number of tasks that can be performed in one period. We characterize the optimal schedule of tasks over time and the optimal assignment of tasks to agents conditional on the outcomes of previous tasks. In particular, we show that delaying tasks is optimal if and only if the effect of an agent's effort on the probability of success is relatively low.
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Suggested Citation

  • Tymofiy Mylovanov & Patrick Schmitz, 2008. "Task scheduling and moral hazard," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(2), pages 307-320, November.
  • Handle: RePEc:spr:joecth:v:37:y:2008:i:2:p:307-320
    DOI: 10.1007/s00199-007-0305-9
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. Guillermo Ordoñez, 2013. "Reputation from nested activities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(3), pages 915-940, April.
    3. Makarov, Uliana, 2011. "Networking or not working: A model of social procrastination from communication," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 574-585.
    4. Susanne Ohlendorf & Patrick W. Schmitz, 2012. "Repeated Moral Hazard And Contracts With Memory: The Case Of Risk‐Neutrality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 433-452, May.
    5. Ohlendorf, Susanne & Schmitz, Patrick W, 2008. "Repeated Moral Hazard, Limited Liability, and Renegotiation," CEPR Discussion Papers 6725, C.E.P.R. Discussion Papers.
    6. Eric S. Chou & Chien-Lung Chen, 2015. "Can Agents Be Better Off with Pay Caps?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(4), pages 1069-1090, October.

    More about this item

    Keywords

    Job design; Task assignment; Limited liability; Hidden actions; D86; L23; M54;

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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