The When and How of Delegated Search

Abstract

Contract Design for Outsourcing Search Firms commonly outsource search for new employees, real estate, or technology to external agents. What should the contracts with these agents look like, and under which conditions should companies even hire agents (as opposed to doing the search in house)? These are the questions studied in “The when and how of delegated search” by Zorc et al. The authors find that the optimal contracts pay the agent a per-time fee as well as a bonus for finding an acceptable alternative. The size of this bonus is defined on signing of the contract and decreases over time. The decision of whether to outsource at all hinges on the firm’s trade-off between speed and quality; in-house search becomes optimal for a firm that prioritizes quality, but outsourcing offers better speed.