The dynamics of project standards

• 成果类型: Article
• 署名作者: Mcclellan, Andrew
• 署名单位: University of Chicago
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2025.105968
• 发表日期: 2025

摘要

We study how a principal decides the duration of a project based on an agent's report about the growth rate of the project's profitability. The principal optimally commits to a project standard, shutting down whenever the project's profitability falls below the standard. Low-growth projects receive stationary standards, whereas high-growth projects receive standards that either increase unboundedly over time (with growing inefficiencies upon shut down), decrease towards the principal's first-best standard (with vanishing inefficiencies upon shut down) or use the same standard as the low-growth project. We explore what type of information is optimally elicited using dynamic standards and show that our results are robust to allowing for transfers and costly information acquistion by the principal.