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Task ordering in incentives under externalities

Author

Listed:
  • Agastya, Murali

    (University of Sydney, 1School of Economics)

  • Bag, Parimal Kanti

    (National University of Singapore, Faculty of Arts and Social Sciences, Department of Economics)

  • Pepito, Nona

    (Essec Business School)

Abstract

In a two-task team project with observable task outcomes, optimal incentives prioritize tasks differently depending on task externalities. When the tasks are independent, Principal follows a decreasing order by placing more essential task first. A task is more essential if its failure compromises the overall project's chance of success from a task-specific cutoff level by a greater percentage. This definition has no systematic relations to the variance of task outcomes. In particular, a more risky task can be less essential or more essential. Under externalities, essentiality and impact jointly determine the optimal ordering. A task with much higher impact can be performed early even if it is less essential. Optimal task ordering thus raises subtle new issues and forms an integral part in team incentives. Our analysis provides some contrast with recent team incentives results.

Suggested Citation

  • Agastya, Murali & Bag, Parimal Kanti & Pepito, Nona, 2016. "Task ordering in incentives under externalities," ESSEC Working Papers WP1601, ESSEC Research Center, ESSEC Business School.
    • Handle: RePEc:ebg:essewp:dr-16001
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    File URL: https://hal-essec.archives-ouvertes.fr/hal-01282673/document
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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

    externalities in teams; sequencing; essential tasks; joint projects; team incentives;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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