Test results are usually collected by agents, who must be incentivized not only to exert effort in testing the concepts but also to report their findings truthfully. Testing a large variety of different product concepts is an integral part of nearly all new product development initiatives-especially in the concept selection phase, where firms seek to identify the most promising concept for further development. However, this setting is very different from the concept selection phase-the focus of our work-in which the firm must evaluate many different product concepts (in a short period of time) so that it can select the most promising concept and advance it to the development phase. In the economics literature, the topic of motivating an agent's participation in this dynamic information acquisition process has gained some traction (Gromb and Martimort 2007, Gerardi and Maestri 2012, Hörner and Samuelson 2013, leading to a theory of optimal incentives for the testing of a single product concept during the development phase. The literature accordingly provides answers to such leading questions as when (in the development phase) to test the product concept, how many repeated tests to pursue and at what level of fidelity to a real-world counterpart, and whether or not testing activities should be collaborative (see, e.g., Thomke and Bell 2001, Terwiesch and Loch 2004, Shalpegin et al. Finally, all agent types benefit from their initial private information. The principal prefers to offer different contracts if and only if the agent types are sufficiently diverse. We then characterize the optimal mechanisms when the agent has superior information at the outset of the relationship. Furthermore, in the first period the agent is indifferent between carrying out his task and sending an uninformative message which ends the relationship immediately. We construct the optimal mechanism and show that the agent is indifferent in every period between performing the test and sending an uninformative message which continues the relationship. First, we assume that the principal and the agent are symmetrically informed at the time of contracting. Neither the agent's effort nor the realizations of his signals are observable. In every period the agent can acquire costly information that is relevant to the principal's decision. This paper analyzes the optimal provision of incentives in a sequential testing context.
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