We analyze optimal contracts in a hierarchy consisting of a principal, a supervisor and an agent. The supervisor is either neutral or altruistic towards the agent, but his preferences are private information. In a model with two supervisor types, we find that the optimal contract may be very...

We consider how a principal can optimally outsource information acquisition to an agent in a dynamic environment when the principal can observe neither the agent's effort of collecting information nor signal realizations. Neither initial transaction nor interim payments are allowed to prevent...

I show that deterministic dynamic contracts between a principal and an agent are always at least as profitable to the principal as stochastic ones, if the so-called first-order approach in dynamic mechanism design is satisfied. The principal commits, while the agent's type evolution follows a...

We consider a situation where an agent's effort is monitored by a supervisor who cares for the agent's well being. This is modeled by incorporating the agent's utility into the utility function of the supervisor. The first best solution can be implemented even if the supervisor's preferences are...

We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be loss-making. In a continuous time setting with hidden information about stochastic operating profits, we show that a revenue-maximizing government can optimally...

This paper examines the optimal provision of incentives for contract designers. A principal hires an agent to draft a contract that is incomplete because the ex-ante specified design might not be appropriate ex-post. The degree of contract incompleteness is endogenously determined by the effort...

Before embarking on a project, a principal must often rely on an agent to learn about its profitability. We model this learning as a two-armed bandit problem and highlight the interaction between learning (experimentation) and production. We derive the optimal contract for both experimentation...

We modelize and investigate the analytical rationale of employing bilateral mechanism design, which simplifies collective mechanism design by ignoring relative information evaluation, in generalized multi-agency contracting games under Bayesian Nash equilibrium. We permit interdependent...

We analyze a principal-supervisor-two-agent hierarchy with soft information. The supervisor may be inefficient such that a noisy signal on the agents’ effort levels is observed. On one hand, the agents require risk premiums to work due to the noisy signal. On the other hand, the supervisor and...

A number of the largest U.S. firms have been found guilty of labor discrimination despite having policies in place designed to avoid that outcome. This paper diagnoses the phenomenon and proposes contractual and regulatory solutions to ameliorate the situation. Existing research (e.g., Becker...