This paper analyzes the optimal contract for a consumer to procure a credence good from an expert when (i) the expert might misrepresent his private information about the consumer’s need, (ii) the expert might not choose the requested service since his choice of treatment is non-observable,...

This paper investigates optimal contracts between risk-neutral parties when both exert efforts and the agent faces limited liability. It is shown that a simple share-or-nothing with bonus contract (SonBo for short) is optimal and implements the second-best outcome, i.e., the best possible...

This paper studies the optimal contract for a risk-neutral agency with limited liability. We introduce a novel formulation of the model, in which the contract design problem reduces to a problem of constructing the distribution function of a random variable. This formulation directly balances...

We study a principal-agent setting in which both sides learn about future profitability from output, and the project can be abandoned/terminated if profitability is too low. With learning, shirking by the agent both reduces output and lowers the principal's estimate of future profitability. The...

It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, ine?ciently low effort. We show that this result does not necessarily extend to a dynamic context. The reason is that, in repeated employment relationships, ?rms may exploit workers’ future...

We consider a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifi- able performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties...

We consider a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifiable performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties...

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 a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifi- able performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties...

In this paper, a principal's decision between delegating two tasks or handling one of the two tasks herself is analyzed. We assume that the principal uses both, formal contracts and informal agreements sustained by the value of future relationships (relational contracts) as incentive device. It...