Paper #1545

Títol:

Dynamic nonmonetary incentives

Autors:

Daniel Bird i Alexander Frug

Data:

Octubre 2016

Resum:

We study a principal-agent interaction where investments and rewards arrive stochastically over time, and are privately observed by the agent. Investments (costly for the agent, beneficial for the principal) can be concealed by the agent. Rewards (beneficial for the agent, costly for the principal) can be forbidden by the principal. We ask how rewards should be used and which investments incentivized. We identify the unique optimal mechanism and analyze the dynamic investment and compensation policies. When all rewards are identical, the unique optimal way to provide incentives is by a "carte-blanche" to pursue all rewards arriving in a predetermined timeframe.

Paraules clau:

Dynamic mechanism design, Uncertain action availability.

Codis JEL:

D82.

Àrea de Recerca:

Microeconomia

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