Conflicting Tasks and Moral Hazard: Theory and Experimental Evidence

46 Pages Posted: 25 Oct 2009

See all articles by Eva I. Hoppe

Eva I. Hoppe

University of Cologne - Department of Economics

David J. Kusterer

University of Cologne - Department of Economics

Date Written: October 23, 2009

Abstract

We study a multi-task principal-agent problem in which tasks can be in direct conflict with each other. In theory, it is difficult to induce a single agent to exert efforts in two conflicting tasks, because effort in one task decreases the success probability of the other task. We have conducted an experiment in which we find strong support for the relevance of this incentive problem. In the presence of conflict, subjects choose two high efforts significantly less often when both tasks are assigned to a single agent than when there are two agents each in charge of one task.

Keywords: moral hazard, conflicting tasks, experiment

JEL Classification: D86, C90, M54

Suggested Citation

Hoppe, Eva I. and Kusterer, David J., Conflicting Tasks and Moral Hazard: Theory and Experimental Evidence (October 23, 2009). Available at SSRN: https://ssrn.com/abstract=1493227 or http://dx.doi.org/10.2139/ssrn.1493227

Eva I. Hoppe (Contact Author)

University of Cologne - Department of Economics ( email )

Cologne, 50923
Germany

David J. Kusterer

University of Cologne - Department of Economics ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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