Project selection with partially verifiable information

Sumit Goel and Wade Hann-Caruthers

Mathematical Social Sciences, 2024, vol. 132, issue C, 105-113

Abstract: We study a principal–agent project selection problem with asymmetric information. The principal must choose exactly one of N projects, each defined by the utility it provides to the principal and to the agent. The agent knows all the utilities, and the principal can commit to a mechanism (without transfers) that maps the agent’s report about the utilities to a chosen project. Unlike the typical literature, which assumes the agent can lie arbitrarily, we examine the principal’s problem under partial verifiability constraints. We characterize the class of truthful mechanisms under a family of partial verifiability constraints and study the principal’s problem for the specific cases of no-overselling and no-underselling. Our results suggest significant benefits for the principal from identifying or inducing such partial verifiability constraints, while also highlighting the simple mechanisms that perform well.

Keywords: Mechanism design; Project selection; Principal–agent problem; Partial verifiability; Cutoff mechanisms; Ally principle (search for similar items in EconPapers)
Date: 2024
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Working Paper: Project selection with partially verifiable information (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:132:y:2024:i:c:p:105-113

DOI: 10.1016/j.mathsocsci.2024.10.003

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