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Wage Floors, Imperfect Performance Measures, and Optimal Job Design

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  • Schöttner, Anja
  • Kragl, Jenny

Abstract

We analyze the effects of wage floors on optimal job design in a moral-hazard model with asymmetric tasks and imperfect aggregate performance measurement. Due to cost advantages of specialization, assigning the tasks to different agents is efficient. A sufficiently high wage floor, however, induces the principal to dismiss one agent or to even exclude tasks from the production process. Imperfect performance measurement always lowers profit under multitasking, but may increase profit under specialization. We further show that variations in the wage floor and the agents' reservation utility have significantly different effects on welfare and optimal job design.

Suggested Citation

  • Schöttner, Anja & Kragl, Jenny, 2013. "Wage Floors, Imperfect Performance Measures, and Optimal Job Design," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79941, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79941
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    Cited by:

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    2. Patrick W Schmitz, 2022. "How (Not) to Purchase Novel Goods and Services: Specific Performance Versus at-will Contracts," The Economic Journal, Royal Economic Society, vol. 132(647), pages 2563-2577.
    3. Carsten Helm & Franz Wirl, 2021. "Multitasking: incentivizing agents differing either in their work ethic or intrinsic motivation," Journal of Economics, Springer, vol. 132(1), pages 41-65, January.
    4. Jed DeVaro & Oliver Gürtler, 2016. "Strategic Shirking: A Theoretical Analysis Of Multitasking And Specialization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(2), pages 507-532, May.
    5. Fabio Römeis & Fabian Herweg & Daniel Müller, 2022. "Salience Bias and Overwork," Games, MDPI, vol. 13(1), pages 1-22, January.
    6. Müller, Daniel & Schmitz, Patrick W., 2021. "The right to quit work: An efficiency rationale for restricting the freedom of contract," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 653-669.
    7. Demougin, Dominique & Helm, Carsten, 2023. "Overwhelmed by routine tasks: A multitasking principal agent perspective," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 654-669.
    8. Akifumi Ishihara, 2020. "On Multitasking and Job Design in Relational Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 68(4), pages 693-736, December.
    9. Jenny Kragl & Alberto Palermo & Guoqian Xi & Joern Block, 2023. "Hiring family or non-family managers when non-economic (sustainability) goals matter? A multitask agency model," Small Business Economics, Springer, vol. 61(2), pages 675-700, August.
    10. Kräkel, Matthias & Müller, Daniel, 2014. "Merger Performance and Managerial Incentives," Bonn Econ Discussion Papers 02/2014, University of Bonn, Bonn Graduate School of Economics (BGSE).

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    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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