In this paper we consider a regulated monopoly that can pad its costs to increaseits cost reimbursement. Even while padding is ineácient the optimal incentivescheme tolerates some padding of costs to reduce the information rents paid tolow cost types. It is shown that high cost ßrms pad costs...

This paper describes psychological contracts and how they are created. Even though the phenomenon of the psychological contract can be observed in a variety of relationships, this paper solely discusses psychological contracts in business settings. The paper discusses in particular how...