Conflicting Tasks and Moral Hazard: Theory andExperimental Evidence

We study a multi-task principal-agent problem in which tasks can be in directconflict with each other. In theory, it is difficult to induce a single agent toexert efforts in two conflicting tasks, because effort in one task decreases thesuccess probability of the other task. We have conducted an experiment inwhich we find strong support for the relevance of this incentive problem. Inthe presence of conflict, subjects choose two efforts significantly less often whenboth tasks are assigned to a single agent than when there are two agents eachin charge of one task.