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Optimal Project Selection Mechanisms


  • Talia Bar

    (University of Connecticut - UCONN - University of Connecticut)

  • Sidartha Gordon

    () (ECON - Département d'économie - Sciences Po)


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.

Suggested Citation

  • Talia Bar & Sidartha Gordon, 2013. "Optimal Project Selection Mechanisms," Working Papers hal-00972867, HAL.
  • Handle: RePEc:hal:wpaper:hal-00972867
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    References listed on IDEAS

    1. Shin, Dongsoo, 2008. "Information acquisition and optimal project management," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 1032-1043, July.
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    7. Scott Stern, 2004. "Do Scientists Pay to Be Scientists?," Management Science, INFORMS, vol. 50(6), pages 835-853, June.
    8. 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.
    9. 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.
    10. Alejandro M. Manelli & Daniel R. Vincent, 2010. "Bayesian and Dominant‐Strategy Implementation in the Independent Private‐Values Model," Econometrica, Econometric Society, vol. 78(6), pages 1905-1938, November.
    11. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    Cited by:

    1. Raphael Boleslavsky & Christopher Cotton, 2018. "Limited capacity in project selection: competition through evidence production," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 385-421, March.
    2. Blumrosen, Liad & Feldman, Michal, 2013. "Mechanism design with a restricted action space," Games and Economic Behavior, Elsevier, vol. 82(C), pages 424-443.

    More about this item


    adverse selection; information acquisition; mechanism design; project selection; limited liability; R&D.;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D


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