Managers with anticipatory emotions have higher current utility if they are optimistic about the future. We study an employment contract between an (endogenously) optimistic manager and realistic investors. The manager faces a trade-off between ensuring that the chosen levels of effort reflect...

The paper analyses, within a moral hazard scenario, a contract between an agent with anticipatory emotions and a principal who responds strategically to those emotions. The agent receives a private signal on the profitability of the task he was hired for. If the signal is informative about the...

We study an employment contract between an (endogenously) optimistic manager and realistic investors. The manager faces a trade-off between ensuring that effort reflects accurate news and savoring emotionally beneficial good news. Investors and manager agree on optimal recollection when the...

This paper studies a contract between an optimistic agent and a realistic principal, both risk-neutral. Even with complete contracts and ex-ante symmetric information, it may be impossible to achieve the first-best unless the weight on emotions is sufficiently low.