We examine optimal dynamic incentive contracts when adverse selection and moral hazard problems are present. We find that early success is optimally penalized in the sense that the agent who succeeds early subsequently faces a lower- powered incentive contract. Penalizing success in this manner...

We examine how a project owner optimally selects a project operator and motivates him to deliver an essential noncontractible input (e.g., effort) when potential operators are privately informed about their limited wealth. Truthful revelation of wealth is induced by promising a higher...