This paper studies the use of incentive contracts in the Bolton-Scharfstein (1990) model when some agents in the population are technically constrained from falsifying reports and stealing cash. The original Bolton-Scharfstein contract may not be optimal for a large range of parametric values....

We argue that contracting with the federal government involves significant proprietary information cost due to regulations requiring contractors to provide confidential information, which may then become available to outsiders via Freedom of Information Act (FOIA) requests. We provide evidence...