- CARMA SEMINAR
- Speaker: Dr Erick Li, The University of Sydney
- Title: On Designing Optimal Permission Sets for Project Selection
- Location: Room V129, Mathematics Building (Callaghan Campus) The University of Newcastle
- Time and Date: 1:30 pm, Wed, 10th Aug 2011
This paper considers designing permission sets to influence the project selection decision made by
a better-informed agent. The project characteristics are two-dimensional. The principal can verify the characteristics of the project selected by the agent. However, the principal cannot observe the number and characteristics of those projects that the agent could, but does not, propose. The payoffs to the agent and the principal are different. Using calculus of variations, we solve the optimal permission set, which can be characterized by a threshold function. We obtain comparative statics on the preference alignment and expected number of projects available. When outcome-based incentives are feasible, we discuss the use of financial inducement to maximize the social welfare. We also extend our analysis to two cases: 1) when one of the project characteristics is unobservable; and 2) when there are multiple agents with private preferences and the principal must establish a universal permission set.
Key words: calculus of variations, optimal permission set, project management.
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