Optimal project deadlines for mean-variance incentive contract designs

This paper studies contracts that incorporate incentives in the form of bonuses and penalties on top of the contract’s fixed payment and investigates their impact on the project completion time. Its aim is to derive an optimal deadline that maximizes the mean-variance utility function for a risk-averse contractor. By maximizing his payoff utility function, the contractor becomes more motivated to bid for the project, as well as to meet its...