Task-Specific Abilities in Multi-Task Principal-Agent Relationships

Download or read book Task-Specific Abilities in Multi-Task Principal-Agent Relationships written by Veikko Thiele and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes a multi-task agency framework where the agent exhibits task-specific abilities. It illustrates how incentive contracts account for the agent's task-specific abilities if contractible performance measures do not reflect the agent's multidimensional contribution to firm value. This paper further sheds light on potential ranking criteria for performance measures in multi-task principal-agent relationships. It demonstrates that performance measures in multi-task agencies cannot necessarily be compared by their respective signal-to-noise ratio as in single-task agency relationships. In fact, it is indispensable to take the induced effort distortion and the measure-cost efficiency into consideration - both determined by the agent's task-specific abilities.