| Project Assignment Rights and Incentives for Eliciting Ideas | |
| Anil Arya, Ohio State University Jonathan Glover, Carnegie Mellon University Bryan R. Routledge, Carnegie Mellon University | |
| Forthcoming Management Science July 2002 | |
| ABSTRACT In this paper, we study an incentive problem that arises between a principal and two agents because they value a real option differently. The real option in our model is a timing option. The agents have limited capacity to undertake projects, and each agent's capacity can be filled now or later. Because the principal cares about capacity in the aggregate but each agent cares only about his own capacity, the agents assign a higher value to the option to wait. As a result, agents sometimes withhold ideas from the principal. We show that decentralization can be a solution to this problem. Delegating assignment rights to an agent reduces the option value of waiting for the other agent suffciently that he is willing to reveal his ideas. | |
| DOWNLOAD: gally-proof of manuscript in PDF File | |
| Data updated: 08.14.2002 15:05 |
Updated at: 06.15.2006 11:01
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