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Task-Specific Abilities in Multi-Task Agency Relations

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  • Thiele, Veikko

Abstract

This paper analyzes a multi-task agency framework where the agent exhibits task-specific abilities. Besides investigating the appendant consequences of applying incongruent performance measures in incentive contracts, this paper demonstrates how the provision of incentives - including the optimal aggregation of information - takes the agent's task-specific abilities into consideration. It further emphasizes the relation between job characteristics and the principal's preference for selecting specific agents. This paper essentially demonstrates that differences in task-specific abilities across agents can provide a supplementary explanation of why they are allocated to various jobs; or why they receive different incentive contracts, even if their jobs are identical.

Suggested Citation

  • Thiele, Veikko, 2007. "Task-Specific Abilities in Multi-Task Agency Relations," MPRA Paper 2470, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:2470
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    References listed on IDEAS

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    1. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May.
    2. George Baker, 2000. "The Use of Performance Measures in Incentive Contracting," American Economic Review, American Economic Association, vol. 90(2), pages 415-420, May.
    3. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    4. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    5. repec:bla:joares:v:27:y:1989:i:1:p:21-39 is not listed on IDEAS
    6. Rees, Ray, 1985. "The Theory of Principal and Agent: Part 2," Bulletin of Economic Research, Wiley Blackwell, vol. 37(2), pages 75-95, May.
    7. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    8. Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
    9. George Baker, 2002. "Distortion and Risk in Optimal Incentive Contracts," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 728-751.
    10. Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
    11. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    12. Wendelin Schnedler, 2003. "On the Prudence of Rewarding A While Hoping for B," The Centre for Market and Public Organisation 03/067, Department of Economics, University of Bristol, UK.
    13. Rees, Ray, 1985. "The Theory of Principal and Agent: Part 1," Bulletin of Economic Research, Wiley Blackwell, vol. 37(1), pages 3-26, January.
    14. Lindbeck, Assar & Snower, Dennis J, 2000. "Multitask Learning and the Reorganization of Work: From Tayloristic to Holistic Organization," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 353-376, July.
    15. Robert Gibbons & Michael Waldman, 2004. "Task-Specific Human Capital," American Economic Review, American Economic Association, vol. 94(2), pages 203-207, May.
    16. Espen R. Moen & Asa Rosén, 2005. "Performance Pay and Adverse Selection," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 279-298, June.
    17. Brickley, James A. & Zimmerman, Jerold L., 2001. "Changing incentives in a multitask environment: evidence from a top-tier business school," Journal of Corporate Finance, Elsevier, vol. 7(4), pages 367-396, December.
    18. Robert Gibbons & Michael Waldman, 1999. "A Theory of Wage and Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1321-1358.
    19. Harry J. Paarsch & Bruce S. Shearer, 1999. "The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 643-667.
    20. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 881-919.
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    Cited by:

    1. Thiele, Veikko, 2007. "Performance measurement in multi-task agencies," Research in Economics, Elsevier, vol. 61(3), pages 148-163, September.

    More about this item

    Keywords

    Task-specific human capital; performance measurement; distortion; multi-task agencies; congruence; incentives;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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