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Task Assignment under Agent Loss Aversion

Author

Listed:
  • Kohei Daido

    (School of Economics, Kwansei Gakuin University)

  • Kimiyuki Morita

    (Graduate School of Commerce and Management, Hitotsubashi University)

  • Takeshi Murooka

    (Department of Economics, University of California-Berkeley)

  • Hiromasa Ogawa

    (Graduate School of Economics, University of Tokyo)

Abstract

We analyze a simple task-assignment model in which a principal assigns a task to one of two agents depending on the state. If the agents have standard concave utility, the principal assigns the task to an agent with the highest productivity in each state. In contrast, if the agents are loss averse, in order to alleviate their expected losses the principal may assign the task to a single agent in all states. Furthermore, the optimal contract may specify the same effort level across states. Our results imply that such simple contracts can be optimal even when employers can write contingent contracts at no cost.

Suggested Citation

  • Kohei Daido & Kimiyuki Morita & Takeshi Murooka & Hiromasa Ogawa, 2013. "Task Assignment under Agent Loss Aversion," Discussion Paper Series 103, School of Economics, Kwansei Gakuin University, revised Mar 2013.
    • Handle: RePEc:kgu:wpaper:103
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    References listed on IDEAS

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    Cited by:

    1. Balmaceda, Felipe, 2018. "Optimal task assignments with loss-averse agents," European Economic Review, Elsevier, vol. 105(C), pages 1-26.
    2. Doruk Iris & Alessandro Tavoni, 2016. "Tipping Points and Loss Aversion in International Environmental Agreements," Working Papers 1603, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    3. Doruk İriş, 2016. "Economic Targets And Loss-Aversion In International Environmental Cooperation," Journal of Economic Surveys, Wiley Blackwell, vol. 30(3), pages 624-648, July.
    4. Herweg, Fabian & Karle, Heiko & Müller, Daniel, 2018. "Incomplete contracting, renegotiation, and expectation-based loss aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 176-201.
    5. Marchegiani, Lucia & Reggiani, Tommaso & Rizzolli, Matteo, 2016. "Loss averse agents and lenient supervisors in performance appraisal," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 183-197.
    6. Dato, Simon & Grunewald, Andreas & Müller, Daniel & Strack, Philipp, 2017. "Expectation-based loss aversion and strategic interaction," Games and Economic Behavior, Elsevier, vol. 104(C), pages 681-705.
    7. Daijiro Kawanaka, 2023. "Mixture Attitudes of Expectation-Based Loss Aversion," Discussion Papers in Economics and Business 23-02, Osaka University, Graduate School of Economics.
    8. Aldo Pignataro, 2019. "The effects of loss aversion on deceptive advertising policies," Theory and Decision, Springer, vol. 87(4), pages 451-472, November.
    9. Dato, Simon & Müller, Daniel & Grunewald, Andreas, 2015. "Expectation-Based Loss Aversion and Strategic Interaction," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112947, Verein für Socialpolitik / German Economic Association.
    10. Daido, Kohei & Morita, Kimiyuki & Murooka, Takeshi & Ogawa, Hiromasa, 2013. "Task assignment under agent loss aversion," Economics Letters, Elsevier, vol. 121(1), pages 35-38.
    11. Dato, Simon & Grunewald, Andreas & Müller, Daniel, 2015. "Expectation-Based Loss Aversion and Strategic Interaction," Bonn Econ Discussion Papers 02/2015, University of Bonn, Bonn Graduate School of Economics (BGSE).

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    More about this item

    Keywords

    task assignment; loss aversion; reference-dependent preferences;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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