rent due to the persistent belief manipulation effect. We characterize the optimal contract using the dynamic programming … technique in which information rent is the unique state variable. In the optimal contract, the optimal effort is front …-loaded and decreases stochastically over time. Furthermore, the optimal contract exhibits an option-like feature in that …

We study an optimal long-term labor contract that provides disability insurance benefits under two frictions: the agent … cannot commit to a long-term contract and the disability shock is private information. We predict that a job with a high risk … contract can be implemented under a three-account trading system in which mandatory savings can be imposed to discourage a …