Working Paper: CEPR ID: DP7976
Authors: Patrick W. Schmitz
Abstract: A principal should hire one agent to perform two sequential tasks when the tasks are conflicting (i.e., a first-stage success makes second-stage effort less effective), while she should hire two different agents when the tasks are synergistic.
Keywords: conflicting tasks; moral hazard; synergies
JEL Codes: D86
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conflicting tasks (D74) | hiring one agent (L85) |
| synergistic tasks (M54) | hiring two agents (L85) |
| hiring one agent (L85) | lower agency costs (D23) |
| hiring two agents (L85) | lower agency costs (D23) |
| conflicting tasks (D74) | disincentive for high effort in second task (D29) |
| synergistic tasks (M54) | prevents shirking on first task (J33) |