Optimal Contracting with Endogenous Project Mission

Arbeitspapier

I analyze a model in which a principal offers a contract to an agent and can influence the agent’s marginal return of effort by the choice of the project mission. The principal’s and the agents’ mission preferences are misaligned, and the agents have unobservable intrinsic motivation levels. I show that the non-contractibility of effort (asymmetric information) brings the mission closer to the agent’s (principal’s) preferences. Furthermore, when effort is non-contractible, the optimal mechanism i) has a “double distortion”' in the mission; ii) does not exclude low-types agents; and iii) can be implemented through a scoring auction. Several applications are discussed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6181

Classification and Topics

• Classification: Wirtschaft ; Public Goods ; Organizational Behavior; Transaction Costs; Property Rights ; Asymmetric and Private Information; Mechanism Design ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: optimal contracting ; non-monetary incentives ; mission preferences ; intrinsic motivation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cassar, Lea
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/149268
• Last update: 10.03.2025, 11:44 AM CET