TY - JOUR
T1 - Designing Deadlines
AU - Madsen, Erik
N1 - Publisher Copyright:
© 2022 American Economic Association. All rights reserved.
PY - 2022/3
Y1 - 2022/3
N2 - I study how an organization should manage a project of uncertain scope, when it is advised by a privately informed expert who prefers to prolong his employment. The optimal long-term contract combines a deadline for project completion and incentive payments which decline as the deadline approaches. When the firm can additionally learn about the project's state from output, the optimal deadline exhibits variable sensitivity to output, with a hard deadline at the outset of the project and increasingly soft deadlines as the project's performance declines.
AB - I study how an organization should manage a project of uncertain scope, when it is advised by a privately informed expert who prefers to prolong his employment. The optimal long-term contract combines a deadline for project completion and incentive payments which decline as the deadline approaches. When the firm can additionally learn about the project's state from output, the optimal deadline exhibits variable sensitivity to output, with a hard deadline at the outset of the project and increasingly soft deadlines as the project's performance declines.
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U2 - 10.1257/AER.20200212
DO - 10.1257/AER.20200212
M3 - Article
AN - SCOPUS:85126664016
SN - 0002-8282
VL - 112
SP - 963
EP - 997
JO - American Economic Review
JF - American Economic Review
IS - 3
ER -