Optimal Incentive Contracts for Experts
This paper analyzes optimal incentive contracts for information acquisition and revelation. A decision maker faces the problem to design a contract that provides an expert with incentives to acquire and reveal information. We show that it is in general not optimal to reward the expert if his recommendation is confirmed. The common observation that experts are paid when their recommendation is confirmed can be explained by incomplete information about the expert's cost to increase the precision of his information. We extend the model to analyze contracting with multiple experts, the timing of expertise, and the provision of incentives when the realized state is not verifiable
|Date of creation:||Apr 2004|
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References listed on IDEAS
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- Dezsö Szalay, 2005.
"The Economics of Clear Advice and Extreme Options,"
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- Ewerhart, Christian & Schmitz, Patrick W., 2000. ""Yes men", integrity, and the optimal design of incentive contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 43(1), pages 115-125, September.
- Ewerhart, Christian & Schmitz, Patrick W., 2000. ""Yes Men," Integrity, and the Optimal Design of Incentive Contracts," MPRA Paper 12534, University Library of Munich, Germany.
- Prendergast, Canice, 1993. "A Theory of "Yes Men."," American Economic Review, American Economic Association, vol. 83(4), pages 757-770, September. Full references (including those not matched with items on IDEAS)
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