A Multitask Model Without Any Externalities
This paper shows that offering a fixed wage maximizes the principal's welfare when the agent needs to engage in multitask and that the effort needed to achieve one task can be induced by suppressing the effort needed for the other task, in the absence of externalities. In the existing literature, it is argued that these results are obtained because externalities exist between the costs of tasks or production of tasks. The former is typically represented by a perfect substitute in the cost function. In this paper, we demonstrate that if the agent is engaged in multitask in which one task produces verifiable output and the other task produces unverifiable output, the same results are obtained without externalities.
|Date of creation:||Jul 2011|
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- Nobuo Akai & Keizo Mizuno & Hiroshi Osano, 2010. "Incentive Transfer Schemes with Marketable and Nonmarketable Public Services," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(4), pages 614-640, December.
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- Edlin, Aaron S & Reichelstein, Stefan, 1996.
"Holdups, Standard Breach Remedies, and Optimal Investment,"
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American Economic Association, vol. 86(3), pages 478-501, June.
- Aaron S. Edlin & Stefan Reichelstein, 1995. "Holdups, Standard Breach Remedies, and Optimal Investment," NBER Working Papers 5007, National Bureau of Economic Research, Inc.
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