The paper studies procurement contracts with pre-project investigations in the presence of adverse selection and moral … related to false negatives. The optimal mechanism is a menu of option contracts that achieves the dual goal of providing …

overstated performance (leniency bias) may be the outcome of optimal contracts under informational asymmetries. …

. We assume that the principal uses both, formal contracts and informal agreements sustained by the value of future … relationships (relational contracts) as incentive device. It is found that the principal is less likely to delegate both tasks in a … dynamic setting than in a static one (where formal contracts are the only feasible incentive device), as handling one task …

We show experimentally that fairness concerns may have a decisive impact on the actual and optimal choice of contracts … in a moral hazard context. Bonus contracts that offer a voluntary and unenforceable bonus for satisfactory performance … provide powerful incentives and are superior to explicit incentive contracts when there are some fair-minded players. But …

Several recent papers argue that contracts provide reference points that affect ex post behavior. We test this … effect of contracts on bargaining threatpoints. We compare situations in which an initial contract is renegotiated to …