This note analyses investment and risk-taking in a simple agency model of public regulation/procurement borrowed from Laffont & Tirole (1993). We show that the principal will overinvest or underinvest depending on whether investment is marginally more productive in bad or in good states. Due to...

We examine the design of incentive-compatible screening mechanisms for dynamic environments in which the agents' types follow a (possibly non-Markov) stochastic process, decisions may be made over time and may affect the type process, and payoffs need not be time-separable. We derive a formula...

How does renegotiation affect contracts between a principal and an agent subject to persistent private information and moral hazard? This paper introduces a concept of renegotiationproofness, which adapts to stochastic games the concepts of weak renegotiation-proofness and internal consistency...

We characterize a firm's profit-maximizing turnover policy in an environment where managerial productivity changes stochastically over time and is the managers' private information. Our key positive result shows that the productivity level that the firm requires for retention declines with the...

I study the properties of optimal long-term contracts in an environment in which the agent's type evolves stochastically over time. The model stylizes a buyer-seller relationship but the results apply quite naturally to many contractual situations including regulation and optimal...

I study the welfare optimal allocation of a number of identical and indivisible objects to a set of heterogeneous risk-neutral agents under the hypothesis that money is not available. Agents have independent private values, which represent the maximum time that they are willing to wait in line...

These notes examine the problem of how to extend envelope theorems to infinite-horizon dynamic mechanism design settings, with an application to the design of bandit auctions.

In Bayesian environments with private information, as described by the types of Harsanyi, how can types of agents be (statistically) disassociated from each other and how are such disassociations reflected in the agents' knowledge structure? Conditions studied are (i) subjective independence...

We characterize the firm's optimal contract for a manager who faces costly effort decisions and whose ability to generate profits for the firm changes stochastically over time. The optimal contract is obtained as the solution to a dynamic mechanism design problem with hidden actions and...

In recent years there has been a growing interest in macro models with heterogeneity in information and complementarity in actions. These models deliver promising positive properties, such as heightened inertia and volatility. But they also raise important normative questions, such as whether...