We characterize the optimal piece-rate contract in the canonical moral hazard setting with a wealth-constrained, risk averse agent. The contract is shown to have a simple, intuitive characterization in a structured, but broad, class of settings.

"We demonstrate the value of "equal pay" policies in teams, even when team members have distinct abilities and make different contributions to team performance. A commitment to compensate all team members in identical fashion eliminates the incentive that each team member otherwise has to...

We examine the effects of a systematic increase in the agents operating costs in a standard agency setting with moral hazard. We identify conditions under which the agent benefits from the increase in his costs. Perhaps more surprisingly, we show that the principal and he agent can both benefit...