Relational Contracts with Multitask Jobs

35 Pages Posted: 10 Feb 2018

See all articles by Bingyong Zheng

Bingyong Zheng

Shanghai University of Finance and Economics - School of Economics

Date Written: February 4, 2018


This paper analyzes a multitask Principal-Agent model in which the performance measures of some tasks are subjective and relational contract is needed for incentive provision. We find that rewarding the Agent based on a subjective measure that aggregates performance on multiple tasks can help ease the tension between motivating the Agent by offering a bonus and the Principal's temptation to renege on bonus payment, which helps reduce the threshold discount factor for relational contract to be self-enforcing. Consequently, when some dimensions of performance can not be objectively determined, it may be optimal not to use explicit contracts for incentive provision even if other dimensions of performance can be objectively measured and there is no cost of writing explicit contracts. We therefore offer a novel explanation to "excessively incomplete contracts" observed in practice.

Keywords: relational contract, multitask, incomplete contract

JEL Classification: C73, D86

Suggested Citation

Zheng, Bingyong, Relational Contracts with Multitask Jobs (February 4, 2018). Available at SSRN: or

Bingyong Zheng (Contact Author)

Shanghai University of Finance and Economics - School of Economics ( email )

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