In a dynamic model of asymmetric information between the owner of a firm and a manager, we investigate the optimal set of contingencies on which an incentive contract should depend when renegotiation is possible. In particular, we characterize the circumstances in which the contracting parties...

We argue that when innovation is sequential (so that each successive invention builds in an essential way on its predecessors) and complementary (so that each potential innovator takes a different research line), patent protection is not as useful for encouraging innovation as in a static...

Recent theoretical research on principal-agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other's actions. Here we concentrate on the former constraint and consider the...