Optimal Task Scheduling under Adverse Selection and Hidden Actions
American Economic Journal: Microeconomics
vol. 15,
no. 2, May 2023
(pp. 660-98)
Abstract
A Principal owns a project consisting of several tasks. Tasks differ, both in their innate success probabilities and their incremental benefits. Moreover, only specialists can perform these tasks. Subject to moral hazard and adverse selection, in what order should the Principal commission the tasks, and when should she terminate the project? What investments into changing tasks' characteristics yield the highest marginal profit? These are typical issues that arise in sequencing R&D activities and other sequential production processes. We show that, despite informational constraints, a simple index—a task's effective marginal contribution—determines the optimal schedule/mechanism.Citation
Agastya, Murali, and Oleksii Birulin. 2023. "Optimal Task Scheduling under Adverse Selection and Hidden Actions." American Economic Journal: Microeconomics, 15 (2): 660-98. DOI: 10.1257/mic.20210126Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- L23 Organization of Production
- L24 Contracting Out; Joint Ventures; Technology Licensing
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
- M11 Production Management
- O31 Innovation and Invention: Processes and Incentives
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