Optimal Contracts with Randomly Arriving Tasks


Workers rarely perform exactly the same tasks every day. Instead, their daily workload may change randomly over time to comply with the fluctuating needs of the organization where they are employed. In this paper, we show that this typical randomness in workplaces has a striking effect on the structure of long-term employment contracts. In particular, simple intertemporal variability in the worker's tasks is sufficient to generate a rich promotion-based dynamics in which, occasionally, the worker receives a (permanent) wage raise and his future work requirements are reduced.

Published as: Optimal Contracts with Randomly Arriving Tasks in The Economic Journal , Vol. 131, No. 637, 1905–1918, July, 2021