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Experimentation in Organizations

Author

Listed:
  • Sofia Moroni

Abstract

I consider a moral hazard problem in which a principal provides incentives to a team of agents towork on a risky project. The project consists of two milestones of unknown feasibility. While workingunsuccessfully, the agents’ private beliefs regarding the feasibility of the project decline. This learningrequires the principal to provide rents to prevent the agents from procrastinating and free-riding onothers’ discoveries. To reduce these rents the principal stops the project inefficiently early and givesidentical agents asymmetric experimentation assignments. The principal prefers to reward agents withbetter contract terms or task assignments rather than monetary bonuses.

Suggested Citation

  • Sofia Moroni, 2016. "Experimentation in Organizations," Working Paper 5876, Department of Economics, University of Pittsburgh.
    • Handle: RePEc:pit:wpaper:5876
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    File URL: https://www.econ.pitt.edu/sites/default/files/working_papers/WP16-016.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Christoph Carnehl & Marco Ottaviani & Justus Preusser, 2024. "Designing Scientific Grants," NBER Chapters, in: Entrepreneurship and Innovation Policy and the Economy, volume 4, pages 139-178, National Bureau of Economic Research, Inc.
    3. Marlats, Chantal & Ménager, Lucie, 2021. "Strategic observation with exponential bandits," Journal of Economic Theory, Elsevier, vol. 193(C).
    4. Achim, Peter, 2024. "Innovation through competitive experimentation," Journal of Mathematical Economics, Elsevier, vol. 111(C).
    5. Christoph Carnehl & Marco Ottaviani & Justus Preusser, 2024. "Designing Scientific Grants," Papers 2410.12356, arXiv.org.
    6. Christoph Carnehl & Johannes Schneider, 2023. "On Risk and Time Pressure: When to Think and When to Do," Journal of the European Economic Association, European Economic Association, vol. 21(1), pages 1-47.
    7. Giampaolo Bonomi, 2025. "Team Disagreement and Productive Persuasion," Papers 2512.22736, arXiv.org, revised Jan 2026.
    8. Brett Green & Curtis R. Taylor, 2016. "Breakthroughs, Deadlines, and Self-Reported Progress: Contracting for Multistage Projects," American Economic Review, American Economic Association, vol. 106(12), pages 3660-3699, December.
    9. Rodivilov, Alexander, 2022. "Monitoring innovation," Games and Economic Behavior, Elsevier, vol. 135(C), pages 297-326.
    10. Jakša Cvitanić & George Georgiadis, 2016. "Achieving Efficiency in Dynamic Contribution Games," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 309-342, November.
    11. Drugov, Mikhail & Ryvkin, Dmitry, 2017. "Biased contests for symmetric players," Games and Economic Behavior, Elsevier, vol. 103(C), pages 116-144.
    12. Yair Antler & Daniel Bird & Santiago Oliveros, 2023. "Sequential Learning," American Economic Journal: Microeconomics, American Economic Association, vol. 15(1), pages 399-433, February.
    13. Rauber, Tom & Weinschenk, Philipp, 2025. "Dynamic interaction and the ineffectiveness of incentives," European Economic Review, Elsevier, vol. 178(C).

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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