Why pay for jobs (and not for tasks)?

Research output: Contribution to journal › Journal article › Research › peer-review

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Why pay for jobs (and not for tasks)? / Czerny, Achim I.; Fosgerau, Mogens; Jost, Peter J.; van Ommeren, Jos N.

In: Journal of Economic Behavior and Organization, Vol. 168, 12.2019, p. 419-433.

Research output: Contribution to journal › Journal article › Research › peer-review

Harvard

Czerny, AI, Fosgerau, M, Jost, PJ & van Ommeren, JN 2019, 'Why pay for jobs (and not for tasks)?', Journal of Economic Behavior and Organization, vol. 168, pp. 419-433. https://doi.org/10.1016/j.jebo.2019.10.020

APA

Czerny, A. I., Fosgerau, M., Jost, P. J., & van Ommeren, J. N. (2019). Why pay for jobs (and not for tasks)? Journal of Economic Behavior and Organization, 168, 419-433. https://doi.org/10.1016/j.jebo.2019.10.020

Vancouver

Czerny AI, Fosgerau M, Jost PJ, van Ommeren JN. Why pay for jobs (and not for tasks)? Journal of Economic Behavior and Organization. 2019 Dec;168:419-433. https://doi.org/10.1016/j.jebo.2019.10.020

Author

Czerny, Achim I. ; Fosgerau, Mogens ; Jost, Peter J. ; van Ommeren, Jos N. / Why pay for jobs (and not for tasks)?. In: Journal of Economic Behavior and Organization. 2019 ; Vol. 168. pp. 419-433.

Bibtex

@article{ff7dff8c71f641c7ae43d197f91f1256,
title = "Why pay for jobs (and not for tasks)?",
abstract = "Consider a principal who assigns a job with two tasks to two identical agents. Monitoring the agents{\textquoteright} efforts is costly. Therefore the principal rewards the agents based on their (noisy) relative outputs. This study addresses the question of whether the principal should evaluate the outputs of each task separately and award two winner prizes, one for each task, or whether it is better to award only one winner prize to the agent who performs the best over the two tasks. There are two countervailing effects. First, there is a prize-diluting effect, because for a given budget, the prizes will be smaller when there are two winner prizes than when there is only one winner prize. The prize-diluting effect reduces the agents{\textquoteright} incentives to invest their effort when there are two winner prizes. Second, there is a noise effect because the noisiness of the evaluation is reduced when there are two winner prizes. The main contribution of this study is to show that the prize-diluting effect dominates the noise effect. Hence, in general, principals will award prizes for combined tasks, and not for separate tasks. Several extensions are considered to test the robustness of this dominance result.",
keywords = "Contests, Head starts, Log-concavity, Multi-task environments, Tournaments",
author = "Czerny, {Achim I.} and Mogens Fosgerau and Jost, {Peter J.} and {van Ommeren}, {Jos N.}",
year = "2019",
month = dec,
doi = "10.1016/j.jebo.2019.10.020",
language = "English",
volume = "168",
pages = "419--433",
journal = "Journal of Economic Behavior & Organization",
issn = "0167-2681",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Why pay for jobs (and not for tasks)?

AU - Czerny, Achim I.

AU - Fosgerau, Mogens

AU - Jost, Peter J.

AU - van Ommeren, Jos N.

PY - 2019/12

Y1 - 2019/12

N2 - Consider a principal who assigns a job with two tasks to two identical agents. Monitoring the agents’ efforts is costly. Therefore the principal rewards the agents based on their (noisy) relative outputs. This study addresses the question of whether the principal should evaluate the outputs of each task separately and award two winner prizes, one for each task, or whether it is better to award only one winner prize to the agent who performs the best over the two tasks. There are two countervailing effects. First, there is a prize-diluting effect, because for a given budget, the prizes will be smaller when there are two winner prizes than when there is only one winner prize. The prize-diluting effect reduces the agents’ incentives to invest their effort when there are two winner prizes. Second, there is a noise effect because the noisiness of the evaluation is reduced when there are two winner prizes. The main contribution of this study is to show that the prize-diluting effect dominates the noise effect. Hence, in general, principals will award prizes for combined tasks, and not for separate tasks. Several extensions are considered to test the robustness of this dominance result.

AB - Consider a principal who assigns a job with two tasks to two identical agents. Monitoring the agents’ efforts is costly. Therefore the principal rewards the agents based on their (noisy) relative outputs. This study addresses the question of whether the principal should evaluate the outputs of each task separately and award two winner prizes, one for each task, or whether it is better to award only one winner prize to the agent who performs the best over the two tasks. There are two countervailing effects. First, there is a prize-diluting effect, because for a given budget, the prizes will be smaller when there are two winner prizes than when there is only one winner prize. The prize-diluting effect reduces the agents’ incentives to invest their effort when there are two winner prizes. Second, there is a noise effect because the noisiness of the evaluation is reduced when there are two winner prizes. The main contribution of this study is to show that the prize-diluting effect dominates the noise effect. Hence, in general, principals will award prizes for combined tasks, and not for separate tasks. Several extensions are considered to test the robustness of this dominance result.

KW - Contests

KW - Head starts

KW - Log-concavity

KW - Multi-task environments

KW - Tournaments

UR - http://www.scopus.com/inward/record.url?scp=85075776379&partnerID=8YFLogxK

U2 - 10.1016/j.jebo.2019.10.020

DO - 10.1016/j.jebo.2019.10.020

M3 - Journal article

AN - SCOPUS:85075776379

VL - 168

SP - 419

EP - 433

JO - Journal of Economic Behavior & Organization

JF - Journal of Economic Behavior & Organization

SN - 0167-2681

ER -

ID: 232269728