IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

A Theory of Optimal Deadlines

  • Flavio Toxvaerd


This paper sets forth a model of contracting for delivery in an environment with time to build and adverse selection. The optimal contract is derived and characterized and it takes the form of a deadline contract. Such a contract stipulates a deadline for delivery for each possible type of agent efficiency. The optimal contract induces inefficient delay by using delivery time as a screening device. Furthermore, rents are decreasing in the agent’s efficiency. In meeting the deadline, the agent’s effort is strictly increasing over time, due to discounting. It is shown that increasing the project’s gross value decreases delivery time, while the scale or difficulty of the project decreases it. Last, it is shown that the agent’s rents are increasing in both project difficulty and gross project value.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem in its series Discussion Paper Series with number dp357.

in new window

Length: 21 pages
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:huj:dispap:dp357
Contact details of provider: Postal: Feldman Building - Givat Ram - 91904 Jerusalem
Phone: +972-2-6584135
Fax: +972-2-6513681
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation for Research in Economics, Yale University.
  2. Gene M. Grossman & Carl Shapiro, 1985. "Optimal Dynamic R&D Programs," NBER Working Papers 1658, National Bureau of Economic Research, Inc.
  3. Alex Cukierman & Zalman F. Shiffer, 1976. "Contracting for Optimal Delivery Time in Long-Term Projects," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 132-149, Spring.
  4. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Robert E. Lucas, Jr., 1971. "Optimal Management of a Research and Development Project," Management Science, INFORMS, vol. 17(11), pages 679-697, July.
  6. Tsur, Yacov & Zemel, Amos, 2002. "The Regulation of Environmental Innovations," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 242-260, September.
  7. Flavio Toxvaerd, 2004. "Time of the Essence," Discussion Paper Series dp358, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:huj:dispap:dp357. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilan Nehama)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.