Screening for breakthroughs

Abstract

We identify a new dynamic agency problem: that of incentivising the prompt disclosure of productive information. To study it, we introduce a general model in which a technological breakthrough occurs at an uncertain time and is privately observed by an agent, and a principal must incentivise disclosure via her control of a payoff-relevant physical allocation. We uncover a deadline structure of optimal mechanisms: they have a simple deadline form in an important special case, and a graduated deadline structure in general. We apply our results to the design of unemployment insurance schemes