Multitasking, Multidimensional Screening, and Moral Hazard with Risk Neutral Agents

Suren Basov and Svetlana Danilkina ()

The Economic Record, 2010, vol. 86, issue s1, 80-86

Abstract: In this paper we consider a model where a risk‐neutral principal devises a contract for a risk neutral agent who can exert effort along different dimensions and possesses private information about her cost of effort. We show that when the number of effort dimensions exceeds the number of performance measures observed by the principal hidden action leads to an additional welfare loss compared with pure adverse selection even if both parties are risk neutral and the production technology is independent of the agent's type. The result implies that if effort has many dimensions it is beneficial to the principal to base employees’ compensation on many performance measures rather than on a single ‘bottom‐line’ measure (e.g. their contribution to the company's profits).

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/j.1475-4932.2010.00662.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecorec:v:86:y:2010:i:s1:p:80-86

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0013-0249

Access Statistics for this article

The Economic Record is currently edited by Paul Miller, Glenn Otto and Martin Richardson

More articles in The Economic Record from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().