In this paper, we analyze the equilibrium incentive schemes oÞered to an agent by two principals who can only observe correlated noisy signals of the one-dimensional action taken by the agent. We look at both cases when the two principals can or cannot cooperate in setting the terms of their...

We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Köszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure, where standard preferences predict a fully...