Expert Advice and Optimal Project Termination

I analyze how a firm should elicit advice from an expert on when to terminate a project with a stochastic lifespan. The firm cannot directly observe the project's lifespan, but imperfectly monitors its current state by observing incremental output. The expert directly observes the state of the project, but prefers to delay termination as much as possible. He possesses no capital and enjoys limited liability, so cannot be sold the project. The optimal long-term contract involves termination payments to the expert and a stochastic project deadline, which is calculated based on the counterfactual beliefs the firm would have held about the state of the project had it received no expert advice. I sharply characterize the efficiency impact of hiring an expert, and show how the optimal contract changes when the expert has initial capital, can be replaced, or can be assigned busywork on the job