Designing Deadlines

Erik Madsen

American Economic Review, 2022, vol. 112, issue 3, 963-97

Abstract: I study how an organization should manage a project of uncertain scope, when it is advised by a privately informed expert who prefers to prolong his employment. The optimal long-term contract combines a deadline for project completion and incentive payments which decline as the deadline approaches. When the firm can additionally learn about the project's state from output, the optimal deadline exhibits variable sensitivity to output, with a hard deadline at the outset of the project and increasingly soft deadlines as the project's performance declines.

JEL-codes: D21 D82 D86 G31 J33 M52 M54 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1257/aer.20200212

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