Incentives, project choice, and dynamic multitasking

• 成果类型: Article
• 署名作者: Szydlowski, Martin
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: THEORETICAL ECONOMICS
• ISSN/ISSBN: 1933-6837
• DOI: 10.3982/TE2858
• 发表日期: 2019-07-01
• 页码: 813-847
• 关键词: Continuous-time contracting; project choice; multitasking; bonus payments

摘要

I study the optimal choice of projects in a continuous-time moral hazard model with multitasking. I characterize the distortions caused by moral hazard and the dynamics of the firm's project choice. Both overinvestment and underinvestment relative to a net present value (NPV) criterion can occur on the path of the contract. As past performance increases, the firm chooses projects that require higher pay-performance sensitivity. When the continuation value is large, investment projects are chosen more efficiently, and project choice depends more on the NPV and less on the incentive costs. I implement the optimal contract with an equity stake, bonus payments, and a personal account.