Thiele, Veikko (2007): Task-Specific Abilities in Multi-Task Agency Relations.
Download (289kB) | Preview
This paper analyzes a multi-task agency framework where the agent exhibits task-specific abilities. It illustrates how incentive contracts account for the agent's task-specific abilities if contractible performance measures do not reflect the agent's contribution to firm value. This paper further sheds light on potential ranking criteria for performance measures in multi-task agencies. It demonstrates that the value of performance measures in multi-task agencies cannot necessarily be compared by their respective signal/noise ratios as in single-task agency relations. It is rather pivotal to take the induced effort distortion and measure-cost efficiency into consideration -- both determined by the agent's task specific abilities.
|Item Type:||MPRA Paper|
|Institution:||University of British Columbia|
|Original Title:||Task-Specific Abilities in Multi-Task Agency Relations|
|Keywords:||Task-specific human capital; performance measurement; distortion; multi-task agencies; congruence; incentives|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
|Depositing User:||Veikko Thiele|
|Date Deposited:||01. Mar 2008 07:02|
|Last Modified:||20. Feb 2013 15:35|
Anthony, R. N. and V. Govindarajan (1995). Management Control Systems (eight ed.). Richard D. Irwin, Inc.
Asch, B. J. (1990). Do incentives matter? the case of navy recruiters. Industrial & Labor Relations Review 43(3), 89–106.
Baker, G. (1992). Incentive contracts and performance measurement. Journal of Political Economy 100(3), 598–614.
Baker, G. (2000). The use of performance measures in incentive contracting. American Economic Review 90(2), 415–420.
Baker, G. (2002). Distortion and risk in optimal incentive contracts. Journal of Human Resources 37(4), 728–751.
Baker, G., M. Gibbs, and B. Holmström (1994). The internal economics of the firm: Evidence from personnel data. Quarterly Journal of Economics 109(4), 881–919.
Banker, R. D. and S. M. Datar (1989). Sensitivity, precision, and linear aggregation of signals for performance evaluation. Journal of Accounting Research 27(1), 21–39.
Banker, R. D. and A. Thevaranjan (2000). Goal congruence and evaluation of performance measures. Working Paper, University of Texas at Dallas.
Bolton, P. and M. Dewatripont (2005). Contract Theory. Cambridge/Massachusetts, London/ England: The MIT Press.
Brickley, J. A. and J. L. Zimmerman (2001). Changing incentives in a multitask environment: Evidence from a top-tier business school. Journal of Corporate Finance 7, 367–396.
Bushman, R. M., R. J. Indjejikian, and M. C. Penno (2000). Private predecision information, performance measure congruity, and the value of delegation. Contemporary Accounting Research 17(4), 561–587.
Corts, K. S. (2005). Teams vs. individual accountability: Solving multi-task problems through job design. Working Paper, Univerity of Toronto.
Datar, S., S. C. Kulp, and R. A. Lambert (2001). Balancing performance measures. Journal of Accounting Research 39(1), 75–92.
Feltham, G. A. and J. Xie (1994). Performance measure congruity and diversity in multi-task principal/agent relations. Accounting Review 69(3), 429–453.
Gibbons, R. (1998). Incentives in organizations. Journal of Economic Perspectives 12(4), 115–132.
Gibbons, R. and M. Waldman (1999). A theory of wage and promotion dynamics inside firms. Quarterly Journal of Economics 114(4), 1321–1358.
Gibbons, R. and M. Waldman (2003). Enriching a theory of wage and promotion dynamics inside firms. MIT Sloan School of Management Working Paper 4324-03.
Gibbons, R. and M. Waldman (2004). Task-specific human capital. American Economic Review 94(2), 203–207.
Grossman, S. J. and O. D. Hart (1983). An analysis of the principal-agent problem. Econometrica 51(1), 7–46.
Holmström, B. (1979). Moral hazard and observability. Bell Journal of Economics 10(1), 74–91.
Holmström, B. and P. Milgrom (1991). Multitask principal-agent analyses: Incentives contracts, asset ownership, and job design. Journal of Law, Economics and Organization 7, 24–52.
Hughes, J. S., L. Zhang, and J. Xie (2005). Production externalities, congruity of aggregate signals, and optimal task assignments. Contemporary Accounting Research 22(2), 393–408.
Kerr, S. (1975). On the folly of rewarding a, while hoping for b. Academy of Management Journal 18(4), 769–783.
Kim, S. K. and Y. S. Suh (1991). Ranking of accounting information systems for management control. Journal of Accounting Research 29(2), 386–396.
Lazear, E. P. (2000). Performance pay and productivity. American Economic Review 90(5), 1346–1361.
Lazear, E. P. (2000). The power of incentives. American Economic Review 90(2), 410–414.
Lindbeck, A. and D. J. Snower (2000). Multitask learning and the reorganization of work: From tayloristic to holistic organization. Journal of Labor Economics 18(3), 353–376.
MacLeod,W. B. (1996). Complexity, contract and the employment relationship. Boston College Working Papers in Economics, No 342.
Maher, M. W., K. V. Ramanathan, and R. B. Peterson (1979). Preference congruence, information accuracy, and employee performance: A field study. Journal of Accounting Research 17(2), 476–503.
Moen, E. R. and . Rosen (2001). Performance pay and adverse selection. Working Paper.
Paarsch, H. J. and B. S. Shearer (1999). The response of worker effort to piece rates: Evidence from the British Columbia tree-planting industry. Journal of Human Resources 34(4), 643–667.
Prendergast, C. (1999). The provision of incentives in firms. Journal of Economic Literature 37(1), 7–63.
Rees, R. (1985). The theory of principal and agent part i. Bulletin of Economic Research 37(1), 3–26.
Salanié, B. (1997). The Economics of Contracts. Cambridge/Massachusetts, London/England: The MIT Press.
Sapienza, H. J. and A. K. Gupta (1994). Impact of agency risks and task uncertainty on venture capitalist-CEO interaction. Academy of Management Journal 37(6), 1618–1632.
Schnedler, W. (2003). On the prudence of rewarding a, while hoping for b. IZA Discussion Papers 765, Institute for the Study of Labor (IZA).
Schöttner, A. (2005). Relational contracts and job design. Working Paper Humboldt-University Berlin.
Shavell, S. (1979). Risk sharing and incentives in the principal and agent relationship. Bell Journal of Economics 10(1), 55–73.
Spremann, K. (1987). Agent and principal. In G. Bamberg and K. Spremann (Eds.), Agency Theory, Information, and Incentives, Berlin et al., pp. 3 – 37.
Available Versions of this Item
Task-Specific Abilities in Multi-Task Agency Relations. (deposited 01. Apr 2007)
- Task-Specific Abilities in Multi-Task Agency Relations. (deposited 01. Mar 2008 07:02) [Currently Displayed]