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Assignment under task dependent private information

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  • Tan, Teck Yong

Abstract

An agent’s private information on his investment return is payoff-relevant only upon investment. This paper studies the contracting and assignment problem of a principal who can assign her agent to invest, which improves the agent’s future productivity but allows the agent to exploit his private information for an information rent, or continuously produce, which prevents post-investment adverse selection but causes stagnation in productivity. With moral hazard in production, the optimal incentive contracts induce efficient production by agents without investment, but the improved productivity of any investment is under-exploited. A better distribution of investment returns can worsen inefficiency, with the principal possibly assigning less agents to invest.

Suggested Citation

  • Tan, Teck Yong, 2021. "Assignment under task dependent private information," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 632-645.
    • Handle: RePEc:eee:jeborg:v:186:y:2021:i:c:p:632-645
    DOI: 10.1016/j.jebo.2020.11.015
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    References listed on IDEAS

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    Cited by:

    1. Murali Agastya & Oleksii Birulin, 2023. "Optimal Task Scheduling under Adverse Selection and Hidden Actions," American Economic Journal: Microeconomics, American Economic Association, vol. 15(2), pages 660-698, May.

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    More about this item

    Keywords

    Adverse selection; Moral hazard; Task assignment;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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