We study the optimal compensation contract in a dynamic moral hazard setting with limited liability and two stages of production. At the end of the first stage, both an objective signal (publicly observed) and a subjective signal (privately observed by the principal) realize, and they are...

We study a two-stage model in which the agent's ability is initially unknown to any party, but the principal can choose a pre-hire screening scheme to discover the agent's ability before offering a contract. Perfect screening enables the principal to fine-tune the contract to the agent's...