Task ordering in incentives under externalities

Murali Agastya, Kanti Parimal Bag () and Nona Pepito ()
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Kanti Parimal Bag: Department of Economics - NUS - National University of Singapore
Nona Pepito: THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique, ESSEC Business School

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Abstract: In a two-task team project with observable task outcomes, optimal incentives prioritize tasks differently depending on task externalities. When the tasks are independent, Principal follows a decreasing order by placing more essential task first. A task is more essential if its failure compromises the overall project's chance of success from a task-specific cutoff level by a greater percentage. This definition has no systematic relations to the variance of task outcomes. In particular, a more risky task can be less essential or more essential. Under externalities, essentiality and impact jointly determine the optimal ordering. A task with much higher impact can be performed early even if it is less essential. Optimal task ordering thus raises subtle new issues and forms an integral part in team incentives. Our analysis provides some contrast with recent team incentives results.

Keywords: externalities in teams; sequencing; essential tasks; joint projects; team incentives (search for similar items in EconPapers)
Date: 2016-01-25
New Economics Papers: this item is included in nep-mic, nep-ppm and nep-sea
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Working Paper: Task ordering in incentives under externalities (2016)
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