We analyze how agents' present bias affects optimal contracting in an infinite-horizon employment setting. The principal maximizes profits by offering a menu of contracts to naive agents: a virtual contract - which agents plan to choose in the future - and a real contract which they end up...

Airline industry restructuring proceeded in high gear following the 9/11 attacks, which triggered a global air transport crisis in the beginning of the new millennium. European (network) legacy carriers have been reorganizing to meet low-cost challengers in European and new competition in global...