Optimal Subjective Contracting with Revision
研究了当委托人可以要求代理人修订工作时，主观评价下的最优合约设计问题，发现修订可能引发委托人过度修订和代理人拖延，导致效率与惩罚之间的三难困境。
We study the optimal contracting problem with subjective evaluation when the principal can ask the agent to revise his work. The possibility of revision benefits the principal by providing the option value of making another attempt at the work. However, it also introduces a new type of incentive problem for the principal: she may ask for revision even if it is inefficient to do so. This new incentive issue for the principal also affects the incentive of the agent: he may procrastinate his effort in anticipation of excessive revision. This results in a trilemma: The optimal contract cannot simultaneously provide for efficient revision, efficient effort, and minimal ex post surplus destruction. The optimal contract will of necessity contain at least one of the following problems: revision, the principal asks for excessive revision; procrastination, the agent shirks in the early stage; or punishment, excessive surplus destruction at low-quality final output. This paper was accepted by Joshua Gans, business strategy.