European Business Schools Librarian's Group

ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School

No WP1601: Task ordering in incentives under externalities

Murali Agastya (), Parimal Kanti Bag () and Nona Pepito ()
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Murali Agastya: University of Sydney, 1School of Economics
Parimal Kanti Bag: National University of Singapore, Faculty of Arts and Social Sciences, Department of Economics
Nona Pepito: Essec Business School

Abstract: In a two-task team project with observable task outcomes, optimal incentives prioritize tasks differently depending on task externalities. When the tasks are independent, Principal follows a decreasing order by placing more essential task first. A task is more essential if its failure compromises the overall project's chance of success from a task-specific cutoff level by a greater percentage. This definition has no systematic relations to the variance of task outcomes. In particular, a more risky task can be less essential or more essential. Under externalities, essentiality and impact jointly determine the optimal ordering. A task with much higher impact can be performed early even if it is less essential. Optimal task ordering thus raises subtle new issues and forms an integral part in team incentives. Our analysis provides some contrast with recent team incentives results.

Keywords: externalities in teams; sequencing; essential tasks; joint projects; team incentives

JEL-codes: D20; D80

18 pages, January 25, 2016

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