We show that contracting in agency with voluntary participation may involve incentives for the agent's abstention. Their provision alters the optimality criteria in the principal's decision-making, further distorts the mechanism, and may lead to breakdown of contracting in circumstances where...

We examine the nature of contracts that optimally reward innovations in a risky environment, when the innovator is privately informed about the quality of her innovation and must engage an agent to develop it. We model the innovator as a principal who has private but imperfect information about...

Learning is crucial to organizational decision making but often needs to be delegated. We examine a dynamic delegation problem where a principal decides on a project with uncertain profitability. A biased agent, who is initially as uninformed as the principal, privately learns the profitability...

Motivated by markets for ''expertise,'' we study a bandit model where a principal chooses between a safe and risky arm. A strategic agent controls the risky arm and privately knows whether its type is high or low. Irrespective of type, the agent wants to maximize duration of experimentation with...

Governments must usually take policy decisions with an imperfect knowledge of the economic actors' type or the actors' effort level. These issues are addressed within the framework of classic adverse selection or moral hazard models. I discuss in this paper how would the government’s and the...

We study the delegation problem between a principal and an agent, who not only has better information about the performance of the available actions but also has superior awareness of the set of actions that are actually feasible. The agent decides which of the available actions to reveal and...

In this paper, we consider a dynamic signaling model of an R&D market in which a researcher can choose either a safe project (exploitation) or a risky project (exploration) at each instance. We argue that there are substantial efficiency gains from rewarding minor innovations above their social...

We show that a solution to the problem of mechanism selection by an informed principal exists in a large class of environments with “generalized private values”: the agents’ payoff functions are independent of the principal’s type. The solution is an extension of Maskin and Tirole’s...

This paper analyzes the optimal provision of incentives in a dynamic information acquisition process. In every period, the agent can acquire costly information that is relevant to the principal's decision. Each signal may or may not provide definitive evidence in favor of the good state. Neither...

A mediator, with no prior information and no control over the market protocol, attempts to redesign the information structure in the market by running an information intermediation mechanism with transfers that first elicits information from an agent, and then discloses information to another...