Task-Specific Abilities in Multi-Task Agency Relations

Thiele, Veikko (2007): Task-Specific Abilities in Multi-Task Agency Relations.

Abstract

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
• Language: English
• 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

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