IDEAS home Printed from https://ideas.repec.org/a/wly/emetrp/v90y2022i5p2215-2247.html
   My bibliography  Save this article

Experimentation and Approval Mechanisms

Author

Listed:
  • Andrew McClellan

Abstract

We study the design of approval rules when costly experimentation must be delegated to an agent with misaligned preferences. When the agent has the option to end experimentation, we show that in contrast to standard stopping problems, the optimal approval rule must be history‐dependent. We characterize the optimal rule and show the approval threshold moves downward over the course of experimentation. We find that private information may qualitatively change the optimal mechanism: an agent can choose a fast‐track option in the form of an initially depressed approval threshold. On expiry of the fast track, the threshold jumps up, introducing more stringent standards. Our results provide a theoretical foundation for both the loosening of approval standards on longer experimentation paths and fast‐track mechanisms.

Suggested Citation

  • Andrew McClellan, 2022. "Experimentation and Approval Mechanisms," Econometrica, Econometric Society, vol. 90(5), pages 2215-2247, September.
    • Handle: RePEc:wly:emetrp:v:90:y:2022:i:5:p:2215-2247
    DOI: 10.3982/ECTA17021
    as

    Download full text from publisher

    File URL: https://doi.org/10.3982/ECTA17021
    Download Restriction: no
    File URL: https://libkey.io/10.3982/ECTA17021?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Emeric Henry & Marco Ottaviani, 2019. "Research and the Approval Process: The Organization of Persuasion," American Economic Review, American Economic Association, vol. 109(3), pages 911-955, March.
    2. Dirk Bergemann & Ulrigh Hege, 2005. "The Financing of Innovation: Learning and Stopping," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 719-752, Winter.
    3. Marina Halac & Navin Kartik & Qingmin Liu, 2017. "Contests for Experimentation," Journal of Political Economy, University of Chicago Press, vol. 125(5), pages 1523-1569.
    4. Marina Halac & Navin Kartik & Qingmin Liu, 2016. "Optimal Contracts for Experimentation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 1040-1091.
    5. Thomas Balzer & Klaus Janßen, 2002. "A duality approach to problems of combined stopping and deciding under constraints," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 55(3), pages 431-446, June.
    6. Thomas Balzer & Klaus Janßen, 2002. "A duality approach to problems of combined stopping and deciding under constraints," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(3), pages 431-446, June.
    7. Kruse, Thomas & Strack, Philipp, 2015. "Optimal stopping with private information," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 702-727.
    8. repec:hal:spmain:info:hdl:2441/1gr6n3t28b94tafji6op8tlqs1 is not listed on IDEAS
    9. Emeric Henry & Marco Ottaviani, 2019. "Research and the Approval Process: The Organization of Persuasion," American Economic Review, American Economic Association, vol. 109(3), pages 911-955, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mustapha Nyenye Issah, 2024. "Feedback strategies in the market with uncertainties," Papers 2410.16203, arXiv.org.
    2. Itai Arieli & Yakov Babichenko & Dima Shaiderman & Xianwen Shi, 2025. "Persuading while Learning," Working Papers tecipa-791, University of Toronto, Department of Economics.
    3. Yingkai Li & Jonathan Libgober, 2023. "Implementing Evidence Acquisition: Time Dependence in Contracts for Advice," Papers 2310.19147, arXiv.org, revised Sep 2024.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maxim Senkov, 2022. "Setting Interim Deadlines to Persuade," CERGE-EI Working Papers wp734, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Emeric Henry & Marco Loseto & Marco Ottaviani, 2022. "Regulation with Experimentation: Ex Ante Approval, Ex Post Withdrawal, and Liability," Management Science, INFORMS, vol. 68(7), pages 5330-5347, July.
    3. Sadler, Evan, 2021. "Dead ends," Journal of Economic Theory, Elsevier, vol. 191(C).
    4. Chen, Chia-Hui & Ishida, Junichiro, 2018. "Hierarchical experimentation," Journal of Economic Theory, Elsevier, vol. 177(C), pages 365-404.
    5. Alessandro Spiganti, 2022. "Wealth Inequality and the Exploration of Novel Alternatives," Working Papers 2022:02, Department of Economics, University of Venice "Ca' Foscari".
    6. Tinghua Yu, 2021. "Intrinsic Motivation, Office Incentives, and Innovation," BCAM Working Papers 2106, Birkbeck Centre for Applied Macroeconomics.
    7. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    8. Khalil, Fahad & Lawarree, Jacques & Rodivilov, Alexander, 2020. "Learning from failures: Optimal contracts for experimentation and production," Journal of Economic Theory, Elsevier, vol. 190(C).
    9. Maximilian Kasy & Jann Spiess, 2022. "Optimal Pre-Analysis Plans: Statistical Decisions Subject to Implementability," Papers 2208.09638, arXiv.org, revised Jul 2024.
    10. Pëllumb Reshidi & Alessandro Lizzeri & Leeat Yariv & Jimmy Chan & Wing Suen, 2021. "Individual and Collective Information Acquisition: An Experimental Study," CESifo Working Paper Series 9468, CESifo.
    11. Maximilian Kasy & Jann Spiess, 2022. "Rationalizing Pre-Analysis Plans:Statistical Decisions Subject to Implementability," Economics Series Working Papers 975, University of Oxford, Department of Economics.
    12. Yichuan Lou, 2023. "Private Experimentation, Data Truncation, and Verifiable Disclosure," Papers 2305.04231, arXiv.org.
    13. Rodivilov, Alexander, 2022. "Monitoring innovation," Games and Economic Behavior, Elsevier, vol. 135(C), pages 297-326.
    14. Xu Tan & Quan Wen, 2020. "Information acquisition and voting with heterogeneous experts," RAND Journal of Economics, RAND Corporation, vol. 51(4), pages 1063-1092, December.
    15. Tinghua Yu, 2021. "Accountability and learning with motivated agents," BCAM Working Papers 2107, Birkbeck Centre for Applied Macroeconomics.
    16. Tinghua Yu, 2022. "Accountability and learning with motivated agents," Journal of Theoretical Politics, , vol. 34(2), pages 313-329, April.
    17. Arie, Guy, 2016. "Dynamic costs and moral hazard: A duality-based approach," Journal of Economic Theory, Elsevier, vol. 166(C), pages 1-50.
    18. Stanton Hudja & Daniel Woods, 2024. "Exploration versus exploitation: A laboratory test of the single‐agent exponential bandit model," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 267-286, January.
    19. Chia-Hui Chen & Junichiro Ishida, 2015. "A Tenure-Clock Problem," ISER Discussion Paper 0919, Institute of Social and Economic Research, Osaka University.
    20. Wei Zhang & Long Gao & Mohammad Zolghadr & Dawei Jian & Mohsen ElHafsi, 2023. "Dynamic incentives for sustainable contract farming," Production and Operations Management, Production and Operations Management Society, vol. 32(7), pages 2049-2067, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:emetrp:v:90:y:2022:i:5:p:2215-2247. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.