Multitask principal-agent problems: Optimal contracts, fragility, and effort misallocation

Philip Bond and Armando Gomes

Journal of Economic Theory, 2009, vol. 144, issue 1, 175-211

Abstract: We analyze a tractable class of multitask principal-agent problems, such as the one faced by a firm with a manager overseeing several projects. We allow for tasks to be complements or substitutes. We avoid the problems associated with the first-order approach by directly characterizing the shape of the agent's indirect utility function, which exhibits a convex then concave shape in effort. We identify a new source of allocational inefficiency across tasks: excessive concentration, and its consequence, insufficient risk taking. Optimal incentive schemes in our environment are generally "fragile": small changes in fundamentals can cause the agent's effort to collapse.

Keywords: Multitasking; First-order; approach; Log-concavity; Polya; frequency; sequence; Fragility (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:144:y:2009:i:1:p:175-211

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