Moving the goalposts

Jeffrey C. Ely, Martin Szydlowski

Research output: Contribution to journalArticle

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 languageEnglish (US)
Pages (from-to)468-506
Number of pages39
JournalJournal of Political Economy
Volume128
Issue number2
DOIs
StatePublished - Feb 1 2020

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