Optimal Project Selection Mechanisms | Zendy

Talia Bar | Zendy; Sidartha Gordon | Zendy

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Optimal Project Selection Mechanisms

Author(s) -

Talia Bar,

Sidartha Gordon

Publication year - 2014

Publication title -

american economic journal microeconomics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 5.339

H-Index - 40

eISSN - 1945-7685

pISSN - 1945-7669

DOI - 10.1257/mic.6.3.227

Subject(s) - set (abstract data type) , ex ante , selection (genetic algorithm) , private information retrieval , function (biology) , mechanism design , liability , microeconomics , quality (philosophy) , value (mathematics) , mechanism (biology) , observable , business , operations research , limited liability , computer science , economics , mathematics , finance , computer security , artificial intelligence , physics , evolutionary biology , machine learning , biology , macroeconomics , programming language , quantum mechanics

We study mechanisms for selecting up to m out of n projects. Project managers’ private information on quality is elicited through transfers. Under limited liability, the optimal mechanism selects projects that maximize some function of the project’s observable and reported characteristics. When all reported qualities exceed their own project-specific thresholds, the selected set only depends on observable characteristics, not reported qualities. Each threshold is related to (i) the outside option level at which the cost and benefit of eliciting information on the project cancel out and (ii) the optimal value of selecting one among infinitely many ex ante identical projects.

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