This paper studies the relation between discrete-time and continuous-time principal-agent models. We derive the continuous-time model as a limit of discrete-time models with ever shorter periods and show that optimal incentive schemes in the discrete-time models approximate the optimal incentive...

This paper develops a technique for studying incentive problems with unidimensional hidden characteristics in a way that is independent of whether the type set is finite, the type distribution has a continuous density, or the type distribution has both mass points and an atomless part. By this...