Aspiration, Inspiration and Perspiration: a Model of Dynamic Project Choice
Abstract: Progress results either from diligent, time-consuming work or from creative inspiration. Consider an agent looking for a solution to a problem while facing a deadline. The agent dynamically decides whether to look on the diligent road or on the creative road. Progress arrives stochastically and the diligent road leads to a solution eventually. The creative road is quicker, but sometimes infeasible. Looking on the creative road provides information about its feasibility. Optimal choices are non-monotone. The agent focuses on creative work if the deadline is soon or far. He concentrates on diligent work for intermediate time remaining. A principal who cares about both screening and output offers one of two contracts: (i) A short deadline and tenure for creative solutions, or (ii) instant tenure and promotion for all creative and some diligent solutions. Our applications are academic careers, election cycles and policy reforms, and product innovation.