We study the optimal dynamics of incentives for a manager whose ability to generate cash ows changes stochastically with time and is his private information. We show that, in general, the power of incentives (or "pay for performance") may either increase or decrease with tenure. However, risk...

We study competition in price-quality menus when consumers privately know their valuation for quality (type), and are heterogeneously informed about the offers available in the market. While firms are ex-ante identical, the menus offered in equilibrium are ordered so that more generous menus...

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

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

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