A principal has a stochastically evolving target that he wishes an agent to repeatedly hit with his effort. The agent does not obtain utility from hitting the target and therefore attempts to shirk; the agent's utility is determined by a second process that symmetrically is of no use to the...

A stochastic process impinges on an agent and a principal in distinct ways. From the agent's perspective the process is noise that interferes with his perception of productivity states, leading him to sometimes take actions that are in retrospect mistaken. From the principal's perspective the...

I analyze the implications of moral hazard in dynamic economy with production. In particular, I add agency frictions to a benchmark stochastic growth model, by assuming that firms observe output but hours worked and productivity are unobservable. I cast the problem as a continuous time principal...

Through marriage, individuals can share some risks that would otherwise be uninsurable. In this paper, we ask how much idiosyncratic income risk can be diversified away through marriage contracts alone versus how much risk there remains for public unemployment insurance programs to alleviate. We...

We study a multiperiod principal-agent problem with moral hazard in which the agent is required to exert effort only in the initial period of the contract. The effort choice of the agent in this first period determines the conditional distribution of output in the following periods. The paper...