Contracting for an Experiment


Clark, A.B., Working Paper. Contracting for an Experiment.


This paper studies contracts that incentivize information acquisition which is costly for an agent and unobservable to a principal. We show that each optimal contract pays a fraction of output, a state-dependent transfer, and a decision-dependent transfer. The fraction of output is increasing in the set of experiments available to the agent, the state-dependent transfer indexes the contract to state-wide differences in output, and the decision-dependent transfer punishes decisions that are likely to make liability limits bind. 


Job Market Paper

Last updated on 04/27/2017