IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Setting Incentives for Scientists Who Engage in Research and Other Activities: An Application of Principal-Agent Theory

Listed author(s):
  • Wallace E. Huffman
  • Just, Richard E.

The objective of this paper is to develop an optimal incentive system for multitaskingscientists in universities or professors under repeat contracting. With the aid of a principalagentmodel under repeat contracting, we show that (i) when a second task is assigned to aprofessor and the two tasks are related, the size of the optimal incentive rate for the first task isreduced in some situations but not others relative to that of a single task, (ii) with an increasein the noise in the technical relationship of the second task or imprecision in outputmeasurement, the optimal incentive rate for that task is reduced and for the first task may bereduced or increased , (iii) with greater efficiency of the professor in producing the secondoutput, as reflected in ability relative to cost of effort, the optimal incentive rate for the firsttask generally decreases, (iv) if the output of the professor’s two tasks are negativelycorrelated then the optimal incentive rate on the first task declines as the size of thiscorrelation increases. The size of the guarantee is always reduced as the professor’s ability fora task increases, but is increased as his cost of effort, noisiness of the technology ormeasurement of output, or correlation between the two outputs increases. It is also possiblethat, as a professor undertakes several difficult-to-measure tasks, the incentive rate will bereduced to the point that an optimal compensation system will involve only a guaranteedsalary, which is a very weak incentive for effort. Selective audits may be useful in thesesituations.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers Archive with number 31647.

in new window

Date of creation: 11 Jun 2010
Handle: RePEc:isu:genres:31647
Contact details of provider: Postal:
Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070

Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Sinclair-Desgagne, Bernard, 1999. "How to Restore Higher-Powered Incentives in Multitask Agencies," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(2), pages 418-433, July.
  2. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 2000. "Multitask agency problems: Focus and task clustering," European Economic Review, Elsevier, vol. 44(4-6), pages 869-877, May.
  3. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 199-217.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:isu:genres:31647. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Curtis Balmer)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.