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Research Details

A/B Contracts

Abstract

This paper aims to improve the practical applicability of the classic theory of incentive contracts under moral hazard. We show that the information provided by an A/B test of incentive contracts is a sufficient statistic for the question of how best to locally improve a status quo incentive contract, given a priori knowledge of the agent's monetary preferences. We assess the empirical relevance of this result using data from DellaVigna and Pope's (2017) study of a variety of incentive contracts. Finally, we discuss how our framework can be extended to incorporate additional considerations beyond those in the classic theory.

Type

Working Paper

Author(s)

George Georgiadis, Michael Powell

Date Published

2020

Citations

Georgiadis, George, and Michael Powell. 2020. A/B Contracts.

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