The paper introduces the problem of unawareness into principal--agent theory and discusses optimal incentive contracts when the agent may be unaware of her action space. Depending on the agent's default behaviour, it can be optimal for the principal to propose an incomplete contract (that keeps...

The paper introduces the problem of unawareness into principal--agent theory and discusses optimal incentive contracts when the agent may be unaware of her action space. Depending on the agent's default behaviour, it can be optimal for the principal to propose an incomplete contract (that keeps...

This paper presents a dynamic contracting model of myopic firm behavior caused by the fear of early project termination by outside investors. Although the parties can conclude long-term contracts, asymmetric information between investors and firms can make it impossible to implement profitable...