Job Design with Conflicting Tasks Reconsidered
10 Pages Posted: 14 Mar 2019
Date Written: 2013
A principal wants two sequential tasks to be performed by wealth-constrained agents. Suppose that there is an outcome externality; i.e., a first-stage success can make second-stage effort more or less effective. If the tasks are conflicting, the principal's profit-maximizing way to induce high efforts is to hire one agent to perform both tasks (so that the prospect to get a larger second-stage rent after a first-stage success motivates the agent to work hard in the first stage). In contrast, when there is an effort externality (i.e., first-stage effort reduces or increases the probability of a second-stage success), then the principal prefers to hire two agents whenever the tasks are conflicting.
Keywords: Moral hazard, Limited liability, Conflicting tasks, Synergies
JEL Classification: D86, L23, J33, M54
Suggested Citation: Suggested Citation