DP6467 Task Scheduling and Moral Hazard

Author(s): Tymofiy Mylovanov, Patrick W. Schmitz
Publication Date: September 2007
Keyword(s): hidden actions, Job design, limited liability, task assignment
JEL(s): D86, L23, M54
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6467

We study a two-period moral hazard problem with risk-neutral and wealth-constrained agents and three identical tasks. We show that the allocation of tasks over time is important if there is a capacity constraint on the number of tasks that can be performed in one period. We characterize the optimal schedule of tasks over time and the optimal assignment of tasks to agents conditional on the outcomes of previous tasks. In particular, we show that delaying tasks is optimal if and only if the effect of an agent's effort on the probability of success is relatively low.