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Production Externalities, Congruity of Aggregate Signals, and Optimal Task Assignments *
Author(s) -
HUGHES JOHN S.,
ZHANG LI,
XIE JAIZHENG JAMES
Publication year - 2005
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1506/q69y-hlqf-d134-wgu7
Subject(s) - externality , intuition , microeconomics , imperfect , economics , incentive , task (project management) , aggregate (composite) , production (economics) , welfare economics , computer science , mathematical economics , psychology , management , cognitive science , linguistics , philosophy , materials science , composite material
In this paper, we consider the role of production externalities in the task assignment problem. Milgrom and Roberts (1992) suggest that complementarities available when agents are assigned to diverse tasks are necessary to overcome distortions in effort allocations caused by an inability to fine‐tune incentives when agents' compensation is based on aggregate imperfect signals. Our analysis formalizes this intuition in a setting that encompasses externalities under both diverse and similar task assignments.