Abstract
We study information as an incentive device in a dynamic moral hazard framework. An agent works on a task of uncertain difficulty, modeled as the duration of required effort. The principal knows the task difficulty and provides information over time. The optimal mechanism features moving goalposts: an initial disclosure makes the agent sufficiently optimistic that the task is easy. If the task is indeed difficult, the agent is told this only after working long enough to put the difficult task within reach. The agent then completes the difficult task even though he never would have chosen to at the outset.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 468-506 |
| Number of pages | 39 |
| Journal | Journal of Political Economy |
| Volume | 128 |
| Issue number | 2 |
| DOIs | |
| State | Published - Feb 1 2020 |
Bibliographical note
Funding Information:This research is supported by grants from the National Science Foundation. We thank the editor and four anonymous referees for constructive feedback that helped us improve the paper. We also thank Briana Chang, Eddie Dekel, Adriana Lleras-Muney, and David Rahman for valuable discussions.
Publisher Copyright:
© 2019 by The University of Chicago. All rights reserved.