A principal (e.g., the US government) contracts with a researcher with unknown costs (e.g., a vaccine developer) to conduct a costly experiment. This contracting problem has a novel feature that captures the difference between the form of an experiment and the strength of its results: researchers face a problem of information design rather than optimal effort. Using a novel comparative static for Bayesian persuasion settings, I characterize the optimal contract and show how experimentation is distorted by the need to screen researchers. Moreover, I show that there is no loss from contracting on the experiment’s result rather than the experiment itself.

Abstract When selling goods like wireless spectrum or electricity contracts, designers often opt for core-selecting mechanisms—i.e. those that induce outcomes in the core—in order to balance revenue and efficiency goals. But increasingly, auctions—such as the Federal Communications Commission’s Incentive Auction and those explored for natural resources—seek to reallocate goods, not just sell them. We show that when bidders can both buy and sell, substitutability among goods is no longer sufficient or necessary for core selection. In particular, in these environments, core selection can fail even with a single good and positive revenue, and can succeed even when some or all bidders view goods as complements. Instead, we show that the key feature that determines core selection is heterogeneity among the bidders. With too much heterogeneity, reallocation mostly realises pre-existing gains from trade among the bidders, and core selection fails. With limited heterogeneity, most gains from trade among the bidders are created by the quantity auctioned, and a core-selecting mechanism is possible.

In this paper, we show that stable outcomes exist in matching environments with complementarities, such as social media platforms or markets for patent licenses. Our results apply to both nontransferable and transferable utility settings, and allow for multilateral agreements and those with externalities. In particular, we show that stable outcomes in these settings are characterized by the largest fixed point of a monotone operator, and so can be found using an algorithm; in the nontransferable utility case, this is a one‐sided deferred acceptance algorithm, rather than a Gale–Shapley algorithm. We also give a monotone comparative statics result as well as a comparative static on the effect of bundling contracts together. These illustrate the impact of design decisions, such as increased privacy protections on social media, or the use of antitrust law to disallow patent pools, on stable outcomes.