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Breakthroughs, deadlines, and self-reported progress: Contracting for multistage projects

Publication ,  Journal Article
Green, B; Taylor, CR
Published in: American Economic Review
December 1, 2016

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.

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Published In

American Economic Review

DOI

ISSN

0002-8282

Publication Date

December 1, 2016

Volume

106

Issue

12

Start / End Page

3660 / 3699

Related Subject Headings

  • Economics
  • 38 Economics
  • 35 Commerce, management, tourism and services
  • 15 Commerce, Management, Tourism and Services
  • 14 Economics
 

Citation

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Green, B., & Taylor, C. R. (2016). Breakthroughs, deadlines, and self-reported progress: Contracting for multistage projects. American Economic Review, 106(12), 3660–3699. https://doi.org/10.1257/aer.20151181
Green, B., and C. R. Taylor. “Breakthroughs, deadlines, and self-reported progress: Contracting for multistage projects.” American Economic Review 106, no. 12 (December 1, 2016): 3660–99. https://doi.org/10.1257/aer.20151181.
Green B, Taylor CR. Breakthroughs, deadlines, and self-reported progress: Contracting for multistage projects. American Economic Review. 2016 Dec 1;106(12):3660–99.
Green, B., and C. R. Taylor. “Breakthroughs, deadlines, and self-reported progress: Contracting for multistage projects.” American Economic Review, vol. 106, no. 12, Dec. 2016, pp. 3660–99. Scopus, doi:10.1257/aer.20151181.
Green B, Taylor CR. Breakthroughs, deadlines, and self-reported progress: Contracting for multistage projects. American Economic Review. 2016 Dec 1;106(12):3660–3699.

Published In

American Economic Review

DOI

ISSN

0002-8282

Publication Date

December 1, 2016

Volume

106

Issue

12

Start / End Page

3660 / 3699

Related Subject Headings

  • Economics
  • 38 Economics
  • 35 Commerce, management, tourism and services
  • 15 Commerce, Management, Tourism and Services
  • 14 Economics