Optimal Contracts for Experimentation
Coauthor(s): Navin Kartik, Qingmin Liu.
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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.
Source: Working paper
Halac, Marina, Navin Kartik, and Qingmin Liu. "Optimal Contracts for Experimentation." Working paper, Columbia Business School, 2012.