Limited-liability and incentive contracting with multiple projects

I examine a principal-agent model with multiple projects where a risk-neutr al manager is protected by limited liability. The analysis has several inte resting implications: (i) Incentive problems are shown to be a natural sour ce of economies of scope, as combining multiple projects under the manageme nt of a single manager relaxes the limited-liability constraint. (ii) As a result, managers may be overloaded with work and exert inefficiently high e ffort. (iii) The analysis has implications,for the optimal allocation of pr ojects to different managers.