Optimal Task Scheduling under Adverse Selection and Hidden Actions

Murali Agastya and Oleksii Birulin

American Economic Journal: Microeconomics, 2023, vol. 15, issue 2, 660-98

Abstract: A Principal owns a project consisting of several tasks. Tasks differ, both in their innate success probabilities and their incremental benefits. Moreover, only specialists can perform these tasks. Subject to moral hazard and adverse selection, in what order should the Principal commission the tasks, and when should she terminate the project? What investments into changing tasks' characteristics yield the highest marginal profit? These are typical issues that arise in sequencing R&D activities and other sequential production processes. We show that, despite informational constraints, a simple index—a task's effective marginal contribution—determines the optimal schedule/mechanism.

JEL-codes: D82 L23 L24 L65 M11 O31 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/mic.20210126

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