Moving the Goalposts

Jeffrey C. Ely and Martin Szydlowski

Journal of Political Economy, 2020, vol. 128, issue 2, 468 - 506

Abstract: We study information as an incentive device in a dynamic moral hazard framework. An agent works on a task of uncertain difficulty, modeled as the duration of required effort. The principal knows the task difficulty and provides information over time. The optimal mechanism features moving goalposts: an initial disclosure makes the agent sufficiently optimistic that the task is easy. If the task is indeed difficult, the agent is told this only after working long enough to put the difficult task within reach. The agent then completes the difficult task even though he never would have chosen to at the outset.

Date: 2020
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