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Optimal Project Selection Mechanisms

Author

Listed:
  • Talia Bar

    (UCONN - University of Connecticut)

  • Sidartha Gordon

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

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," SciencePo Working papers hal-00972867, HAL.
    • Handle: RePEc:hal:wpspec:hal-00972867
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-00972867
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    References listed on IDEAS

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    1. Shin, Dongsoo, 2008. "Information acquisition and optimal project management," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 1032-1043, July.
    2. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
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    6. 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.
    7. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    8. David Sappington, 1982. "Optimal Regulation of Research and Development under Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 354-368, Autumn.
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    Cited by:

    1. Raphael Boleslavsky & Bruce Carlin & Christopher Cotton, 2021. "A Model of Challenge Funds: How Funding Availability and Selection Rigor Affect Project Quality," Working Paper 1470, Economics Department, Queen's University.
    2. 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.

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    More about this item

    Keywords

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

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • 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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