Relational Contracts, Multitasking, and Job Design

This article analyzes optimal job design in a repeated principal-agentrelationship when there is only one contractible and imperfectperformance measure for three tasks whose contribution to firmvalue is nonverifiable. The tasks can be assigned to eitherone or two agents. Assigning an additional task to an agentstrengthens his relational contract. Therefore, broad task assignmentsare optimal when the performance measure strongly distorts incentivesfor the two-task job. This is more likely to be the case ifthese two tasks are substitutes.