- (pp. 267-303)
AbstractThis paper aims to improve the practical applicability of the classic theory of incentive contracts under moral hazard. We establish conditions under which the information provided by an A/B test of incentive contracts is sufficient for answering the question of how best to improve a status quo incentive contract, given a priori knowledge of the agent's monetary preferences. We assess the empirical relevance of this result using data from DellaVigna and Pope's (2018) study of a variety of incentive contracts. Finally, we discuss how our framework can be extended to incorporate additional considerations beyond those in the classic theory.
CitationGeorgiadis, George, and Michael Powell. 2022. "A/B Contracts." American Economic Review, 112 (1): 267-303. DOI: 10.1257/aer.20200732
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making