Borges, Ana; Correia-da-Silva, João; Laussel, Didier - In: Journal of Economics 111 (2014) 2, pp. 105-130
We obtain the optimal contract for the government (principal) to regulate a manager (agent) who has a taste for empire-building that is his/her private information. This taste for empire-building is modeled as a utility premium that is proportional to the difference between the contracted output...