Task assignment under agent loss aversion

We analyze a task-assignment model in which a principal assigns a task to one of two agents depending on future states. If the agents have concave utility, the principal assigns the task to them contingent on the state. We show that if the agents are loss averse, a state-independent assignment–assigning the task to a single agent in all states–can be optimal even when the principal can write a contingent contract at no cost.

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Year of publication:	2013
Authors:	Daido, Kohei ; Morita, Kimiyuki ; Murooka, Takeshi ; Ogawa, Hiromasa
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 121.2013, 1, p. 35-38
Publisher:	Elsevier
Subject:	Task assignment \| Loss aversion \| Reference-dependent preferences \| State-independent assignment

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Type of publication:	Article
Classification:	D03 - Behavioral Economics; Underlying Principles ; D86 - Economics of Contract: Theory ; M12 - Personnel Management ; M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs)
Source:	RePEc - Research Papers in Economics

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