7. time not on our side Consider a Chapter 15 style multitask setting, especially Example 15.1 where two tasks are present and the firm wants all of the input assigned to the first task. As in that case, the performance evaluation measure is given by x = a1 + α · a2 + ε

where a1 is the desired task and ε is our ever present error term. a2, however, is a task that is of no value to the firm, but surely influences the performance measure.

(a) Suppose α < 1. Does the firm need to worry about the manager engaging in manipulative behavior?

(b) Suppose the story is repeated a number of periods. Each cycle improves the manager’s understanding of how to exploit the system by applying his time and talent to the manipulation task.

This means that parameter α increases with each repetition.

Does this tell you anything about job rotation or accounting change in general?