Assignment under task dependent private information

Teck Yong Tan

Journal of Economic Behavior & Organization, 2021, vol. 186, issue C, 632-645

Abstract: An agent’s private information on his investment return is payoff-relevant only upon investment. This paper studies the contracting and assignment problem of a principal who can assign her agent to invest, which improves the agent’s future productivity but allows the agent to exploit his private information for an information rent, or continuously produce, which prevents post-investment adverse selection but causes stagnation in productivity. With moral hazard in production, the optimal incentive contracts induce efficient production by agents without investment, but the improved productivity of any investment is under-exploited. A better distribution of investment returns can worsen inefficiency, with the principal possibly assigning less agents to invest.

Keywords: Adverse selection; Moral hazard; Task assignment (search for similar items in EconPapers)
JEL-codes: D21 D82 D86 M53 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:186:y:2021:i:c:p:632-645

DOI: 10.1016/j.jebo.2020.11.015

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