Heski Bar-Isaac and Johannes Hörner
An agent has different abilities in two types of tasks. These tasks are revealed over time through his performance. The agent initially decides whether to engage in only one task (specialize) or to take on any task that arises (be a generalist). This decision trades off the cost of being idle against staying available for relatively lucrative tasks. We compare specializing with acting as a generalist in an infinite-horizon model and provide complete characterizations of efforts. We show how specializing acts as a means of committing to exert more effort. In a two-period version of the model, this implies that positive costs for switching strategies, through license fees, for example, may be socially desirable.