Experimentation in organizations

Sofia Moroni

doi:10.3982/te3069

journal article Open Access Jan 01, 2022

Experimentation in organizations

Sofia Moroni

Theoretical Economics Vol. 17 No. 3 pp. 1403-1450 · The Econometric Society

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Abstract

We consider a moral hazard problem in which a principal provides incentives to a team of agents to work on a risky project. The project consists of two milestones of unknown feasibility. While working unsuccessfully, the agents' private beliefs regarding the feasibility of the project decline. This learning requires the principal to provide rents to prevent the agents from procrastinating and free‐riding on others' discoveries. To reduce these rents, the principal stops the project inefficiently early and gives identical agents asymmetric experimentation assignments. The principal prefers to reward agents with better future contract terms or task assignments rather than monetary bonuses.

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Details

Published: Jan 01, 2022
Vol/Issue: 17(3)
Pages: 1403-1450
License: View

Authors

S

Sofia Moroni

School of Public and International Affairs, Princeton University

Cite This Article

Sofia Moroni (2022). Experimentation in organizations. Theoretical Economics, 17(3), 1403-1450. https://doi.org/10.3982/te3069

Experimentation in organizations

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