Optimal Contracts for Experimentation

Marina Halac, Navin Kartik and Qingmin Liu

The Review of Economic Studies, 2016, vol. 83, issue 3, 1040-1091

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.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:83:y:2016:i:3:p:1040-1091.

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