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Full-Text Articles in Social and Behavioral Sciences
Incentives For Experimenting Agents, Johannes Hörner, Larry Samuelson
Incentives For Experimenting Agents, Johannes Hörner, Larry Samuelson
Cowles Foundation Discussion Papers
We examine a repeated interaction between an agent, who undertakes experiments, and a principal who provides the requisite funding for these experiments. The agent’s actions are hidden, and the principal, who makes the offers, cannot commit to future actions. We identify the unique Markovian equilibrium (whose structure depends on the parameters) and characterize the set of all equilibrium payoffs, uncovering a collection of non-Markovian equilibria that can Pareto dominate and reverse the qualitative properties of the Markovian equilibrium. The prospect of lucrative continuation payoffs makes it more expensive for the principal to incentivize the agent, giving rise to a dynamic …
Incentives For Experimenting Agents, Johannes Hörner, Larry Samuelson
Incentives For Experimenting Agents, Johannes Hörner, Larry Samuelson
Cowles Foundation Discussion Papers
We examine a repeated interaction between an agent, who undertakes experiments, and a principal who provides the requisite funding for these experiments. The agent’s actions are hidden, and the principal, who makes the offers, cannot commit to future actions. We identify the unique Markovian equilibrium (whose structure depends on the parameters) and characterize the set of all equilibrium payoffs, uncovering a collection of non-Markovian equilibria that can Pareto dominate and reverse the qualitative properties of the Markovian equilibrium. The prospect of lucrative continuation payoffs makes it more expensive for the principal to incentivize the agent, giving rise to a dynamic …
Incentives For Experimenting Agents, Johannes Hörner, Larry Samuelson
Incentives For Experimenting Agents, Johannes Hörner, Larry Samuelson
Cowles Foundation Discussion Papers
We examine a repeated interaction between an agent, who undertakes experiments, and a principal who provides the requisite funding for these experiments. The repeated interaction gives rise to a dynamic agency cost — the more lucrative is the agent’s stream of future rents following a failure, the more costly are current incentives for the agent, giving the principal an incentive to reduce the continuation value of the project. We characterize the set of recursive Markov equilibria. We also find that there are non-Markov equilibria that make the principal better off than the recursive Markov equilibrium, and that may make both …
Incentives For Experimenting Agents, Johannes Hörner, Larry Samuelson
Incentives For Experimenting Agents, Johannes Hörner, Larry Samuelson
Cowles Foundation Discussion Papers
We examine a repeated interaction between an agent, who undertakes experiments, and a principal who provides the requisite funding for these experiments. The repeated interaction gives rise to a dynamic agency cost — the more lucrative is the agent’s stream of future rents following a failure, the more costly are current incentives for the agent, giving the principal an incentive to reduce the continuation value of the project. We characterize the set of recursive Markov equilibria. We show that there are non-Markov equilibria that make the principal better off than the recursive Markov equilibrium, and that may make both players …
Collaborating, Alessandro Bonatti, Johannes Hörner
Collaborating, Alessandro Bonatti, Johannes Hörner
Cowles Foundation Discussion Papers
This paper examines moral hazard in teams over time. Agents are collectively engaged in an uncertain project, and their individual efforts are unobserved. Free-riding leads not only to a reduction in effort, but also to procrastination. The collaboration dwindles over time, but never ceases as long as the project has not succeeded. In fact, the delay until the project succeeds, if it ever does, increases with the number of agents. We show why deadlines, but not necessarily better monitoring, help to mitigate moral hazard.