A standard hidden information model is considered to study the influence of the a priori productivity distribution on the optimal contract. A priori more productive (hazard rate dominant) agents work less, enjoy lower rents, but generate a higher expected surplus.

A standard hidden information model is considered to study the influence of the a priori productivity distribution on the optimal contract. A priori more productive (hazard rate dominant) agents work less, enjoy lower rents, but generate a higher expected surplus.

A standard hidden information model is considered to study the influence of the a priori productivity distribution on the optimal contract. A priori more productive (hazard rate dominant)agents work less, enjoy lower rents, but generate a higher expected surplus

We study the optimal dynamics of incentives for a manager whose ability to generate cash .ows changes stochastically with time and is his private information. We show that, in general, the power of incentives (or "pay for performance") may either increase or decrease with tenure. However, risk...

The two major paradigmsin the theoretical agency literature aremoral hazard (i.e., hidden action)and adverseselection (i.e., hiddeninformation). Prior research typically solves these problemsin isolation, as opposed to simultaneouslyincorporating both adverseselection and moral hazard features....

I study the optimal incentive provision in a principal–agent relationship with costly information acquisition by the agent. I emphasize that adverse selection or moral hazard is the principal's endogenous choice by inducing or deterring information acquisition. The principal designs the...