Abstract
Holmstrom and Milgrom (1991) proposed a multitask principal-agent model in which the principal's utility is determined by several tasks the agent engages in. Their results depend on externalities between tasks and several assumptions related to the agent's eort. In this paper, we override certain assumptions (such as, the agent's eort can be negative and disutility is a non-increasing function of the eort up to some level) and obtain the similar outcomes in deriving …xed wage contracts and eort allocation problems. We further introduce timing, outputs that are unveri…able (such as leadership and collegial work), and …rm-speci…c knowledge as observed in actual labor markets and practices. This restructure also allows us to develop a multitask model without externalities, allowing us to study an optimal wage pro…le and …nd the optimal timing to sign a contract. Our model predicts that in industries where unveri…able outputs are valued, the more frequently the wage contract is renewed.
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