A/B Contracts

Research output: Contribution to journalArticlepeer-review

Abstract

This paper aims to improve the practical applicability of the classic theory of incentive contracts under moral hazard. We establish conditions under which the information provided by an A/B test of incentive contracts is sufficient for answering the question of how best to 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 (2018) 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.

Original languageEnglish (US)
Pages (from-to)267-303
Number of pages37
JournalAmerican Economic Review
Volume112
Issue number1
DOIs
StatePublished - Jan 1 2022

ASJC Scopus subject areas

  • Economics and Econometrics

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