accepted, Journal of Political Economy
A principal has to take a binary decision. She relies on information privately held by a completely biased agent. The principal cannot incentivize with transfers but can learn the agent's information at a cost. Additionally, the principal privately observes a signal correlated with the agent's type. Transparent mechanisms are optimal: Unlike in standard results with correlation, the principal's payoff is the same as if her signal was public. A simple cutoff form is optimal: Favorable signals ensure the agent's preferred action. Signals below this cutoff lead to the non-preferred action unless the agent appeals. An appeal always triggers type verification.
Revise and Resubmit, Theoretical Economics
This paper studies a principal who incentivizes an agent to achieve and maintain compliance and voluntarily disclose incidences of non-compliance. Compliance is modeled as a persistent binary process that jumps at random times arriving at a rate that depends on the agent’s efforts. The state of compliance is verifiable by the principal only at isolated instances through costly inspections. We show that in principal-optimal equilibria, the principal attains maximum compliance by using deterministic inspections. The optimal equilibrium features periodic inspection cycles which are suspended during periods of self-reported non-compliance, in which the agent is fined. We explain how commitment to random inspections benefits the principal by relaxing the agent's incentive-compatibility constraints, and we discuss possible ways for the principal to overcome her commitment problem through third-party involvement.
This paper studies information transmission in situations in which multiple senders compete for the attention of a decision maker. Senders are partially informed about a state and choose how to reveal information over time to attract maximal attention. A decision maker wants to learn about the state but faces attention costs. I characterise an equilibrium with simple strategies that lead to full information transmission in minimal time. The attention each sender receives is proportional to the residual value of her information. With endogenous information acquisition, increasing initial public information may decrease the aggregate information in society.
A principal offers a dynamic contract for experimentation to an agent with limited liability. The agent has an incentive to secretly divert funds for private consumption, but the principal can perform costly inspections to reveal past diversion. The optimal contract takes a simple structure: Inspections are deterministically scheduled with increasing distance such that, in earlier periods, additional incentives are provided by the threat of losing the continuation value from the final phase. I discuss an implementation through stage-financing, where funds are released after each inspection for the entire stage until the next inspection. Inspections make funding in multiple stages a necessary feature of the optimal contract.
Should the Timing of Inspections be Predictable?, with Ian Ball