Inequality Aversion and the Non-Congruity Problem in Multitask Principal–Agent Models

This project investigates whether inequality aversion in agents can alleviate the non-congruity problem in multitask principal–agent relationships. When the performance measure rewards only part of an agent’s value-creating activities, the agent allocates effort toward the rewarded tasks rather than toward those that best serve the principal’s objective. An inequality-averse agent, who dislikes payoff differences with the principal, may partially internalize the principal’s objective and adjust effort accordingly. The project examines whether inequality aversion can shift effort allocation toward the first-best by improving congruity.