Halac, Marina, Kartik, Navin and Liu, Qingmin (2016) Optimal contracts for experimentation. Review of Economic Studies, 83 (3). pp. 1040-1091. doi:10.1093/restud/rdw013

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Abstract

This paper studies a model of long-term contracting for experimentation. We consider a principal-agent relationship with adverse selection on the agent’s ability, dynamic moral hazard, and private learning about project quality. We find that each of these elements plays an essential role in structuring dynamic incentives, and it is only their interaction that generally precludes efficiency. Our model permits an explicit characterization of optimal contracts.

Item Type:	Journal Article
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management T Technology > T Technology (General)
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Project management , Research and development contracts -- Evaluation, Farm tenancy , Publishers and publishing, Moral hazard
Journal or Publication Title:	Review of Economic Studies
Publisher:	Oxford University Press
ISSN:	0034-6527
Official Date:	July 2016
Dates:	Date Event July 2016 Published 21 March 2016 Available 14 January 2016 Accepted September 2013 Submitted
Date of first compliant deposit:	15 September 2016
Volume:	83
Number:	3
Page Range:	pp. 1040-1091
DOI:	10.1093/restud/rdw013
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Funder:	University of Chicago. Booth School of Business, Alfred P. Sloan Foundation

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