Breakthroughs, deadlines, and self-reported progress: Contracting for multistage projects
We study the optimal incentive scheme for a multistage project in which the agent privately observes intermediate progress. The optimal contract involves a soft deadline wherein the principal guarantees funding up to a certain date-if the agent reports progress at that date, then the principal gives him a relatively short hard deadline to complete the project-if progress is not reported at that date, then a probationary phase begins in which the project is randomly terminated at a constant rate until progress is reported. We explore several variants of the model with implications for optimal project design. In particular, we show that the principal benefits by imposing a small cost on the agent for submitting a progress report or by making the first stage of the project somewhat "harder" than the second.
Duke Scholars
Altmetric Attention Stats
Dimensions Citation Stats
Published In
DOI
ISSN
Publication Date
Volume
Issue
Start / End Page
Related Subject Headings
- Economics
- 38 Economics
- 35 Commerce, management, tourism and services
- 15 Commerce, Management, Tourism and Services
- 14 Economics
Citation
Published In
DOI
ISSN
Publication Date
Volume
Issue
Start / End Page
Related Subject Headings
- Economics
- 38 Economics
- 35 Commerce, management, tourism and services
- 15 Commerce, Management, Tourism and Services
- 14 Economics