Patrick W. Schmitz
European Economic Review, Vol. 57, 2013, 108–117.
Abstract. A principal wants two sequential tasks to be performed by wealth-constrained agents. When the tasks are conflicting (i.e., when a first-stage success makes second-stage effort less effective), the principal`s profit-maximizing way to induce high efforts is to hire one agent to perform both tasks. In this case, the prospect to get a larger second-stage rent after a first-stage success motivates the agent to work hard in the first stage. In contrast, when the tasks are synergistic, the principal prefers to hire two different agents for the two tasks. These results are in contrast to previous studies that consider simultaneous tasks.
The working paper version is available for download at SSRN.
The paper is available for download.