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Task ordering in incentives under externalities

Author

Listed:
  • Murali Agastya

    (University of Sydney, School of economics - The University of Sydney)

  • Kanti Parimal Bag

    (Department of Economics - NUS - National University of Singapore)

  • Nona Pepito

    (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique, 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

  • Murali Agastya & Kanti Parimal Bag & Nona Pepito, 2016. "Task ordering in incentives under externalities," Working Papers hal-01282673, HAL.
    • Handle: RePEc:hal:wpaper:hal-01282673
    Note: View the original document on HAL open archive server: https://essec.hal.science/hal-01282673
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    References listed on IDEAS

    as
    1. Darwin V. Neher, 1999. "Staged Financing: An Agency Perspective," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(2), pages 255-274.
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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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