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Optimal Project Selection Mechanisms

Listed author(s):
  • Talia Bar
  • Sidartha Gordon

We study mechanisms for selecting up to m out of n projects. Project managers' private information on quality is elicited through transfers. Under limited liability, the optimal mechanism selects projects that maximize some function of the project's observable and reported characteristics. When all reported qualities exceed their own project-specific thresholds, the selected set only depends on observable characteristics, not reported qualities. Each threshold is related to (i) the outside option level at which the cost and benefit of eliciting information on the project cancel out and (ii) the optimal value of selecting one among infinitely many ex ante identical projects.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.6.3.227
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File URL: http://www.aeaweb.org/aej/mic/app/0603/2011-0086_app.pdf
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File URL: http://www.aeaweb.org/aej/mic/ds/0603/2011-0086_ds.zip
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Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 6 (2014)
Issue (Month): 3 (August)
Pages: 227-255

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Handle: RePEc:aea:aejmic:v:6:y:2014:i:3:p:227-55
Note: DOI: 10.1257/mic.6.3.227
Contact details of provider: Web page: https://www.aeaweb.org/aej-micro
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  1. Manelli, Alejandro M & Vincent, Daniel R, 1995. "Optimal Procurement Mechanisms," Econometrica, Econometric Society, vol. 63(3), pages 591-620, May.
  2. John Moore, 1985. "Optimal Labour Contracts when Workers have a Variety of Privately Observed Reservation Wages," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 37-67.
  3. Guochang Zhang, 1997. "Moral Hazard in Corporate Investment and the Disciplinary Role of Voluntary Capital Rationing," Management Science, INFORMS, vol. 43(6), pages 737-750, June.
  4. Shin, Dongsoo, 2008. "Information acquisition and optimal project management," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 1032-1043, July.
  5. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
  6. Mookherjee, Dilip & Reichelstein, Stefan, 1992. "Dominant strategy implementation of Bayesian incentive compatible allocation rules," Journal of Economic Theory, Elsevier, vol. 56(2), pages 378-399, April.
  7. Richard A. Lambert, 1986. "Executive Effort and Selection of Risky Projects," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 77-88, Spring.
  8. Scott Stern, 2004. "Do Scientists Pay to Be Scientists?," Management Science, INFORMS, vol. 50(6), pages 835-853, June.
  9. Che, Yeon-Koo & Gale, Ian, 2000. "The Optimal Mechanism for Selling to a Budget-Constrained Buyer," Journal of Economic Theory, Elsevier, vol. 92(2), pages 198-233, June.
  10. Krishna, Vijay, 2002. "Auction Theory," Elsevier Monographs, Elsevier, edition 1, number 9780124262973.
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