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Multi-tasking and inequity aversion in the linear–exponential–normal moral hazard model


Bartling, Björn (2012). Multi-tasking and inequity aversion in the linear–exponential–normal moral hazard model. Economics Letters, 116(3):523-525.

Abstract

This paper analyzes the impact of wage comparisons among inequity-averse agents on optimal incentive intensities in a linear–exponential–normal moral hazard model with multi-tasking. We consider individual and team production tasks that differ in that only individual production causes wage inequality. If the tasks are substitutes in the agents’ effort cost functions, the principal might want to balance incentives and reduce the agents’ overall inequality exposure. We show that team production incentives can then be muted below the level that results from noisy measurement and risk aversion alone—even though team production does not cause wage inequality.

Abstract

This paper analyzes the impact of wage comparisons among inequity-averse agents on optimal incentive intensities in a linear–exponential–normal moral hazard model with multi-tasking. We consider individual and team production tasks that differ in that only individual production causes wage inequality. If the tasks are substitutes in the agents’ effort cost functions, the principal might want to balance incentives and reduce the agents’ overall inequality exposure. We show that team production incentives can then be muted below the level that results from noisy measurement and risk aversion alone—even though team production does not cause wage inequality.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:September 2012
Deposited On:30 Oct 2012 11:10
Last Modified:21 Nov 2017 16:12
Publisher:Elsevier
ISSN:0165-1765
Publisher DOI:https://doi.org/10.1016/j.econlet.2012.04.010

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