Deadlines and penalties are widely used to incentivize effort. We model how these incentive contracts affect the work rate and time taken in a procurement setting, characterizing the efficient contract design. Using new micro-level data on Minnesota highway construction contracts that includes...

We study dynamic moral hazard when the principal can only commit to spot contracts. Principal and agent are ex ante symmetrically uncertain about the difficulty of the job, and update their beliefs on observing output. Since the agent's effort is private, he has an additional incentive to shirk...

Recent advances in IT and data science give firms more flexibility to process, store and communicate the growing volume and variety of performance data at a reduced and yet significant cost. In this paper, we study the impact of this cost and flexibility on employee monitoring and the internal...

We study dynamic moral hazard with symmetric ex ante uncertainty about the difficulty of the job. The principal and agent update their beliefs about the difficulty as they observe output. Effort is private and the principal can only offer spot contracts. The agent has an additional incentive to...

It is s important for firms to choose appropriate performance measurements when they evaluate their employees' performance. In this paper, we examine the relationship between uncertainty and incentives in which the risk-averse agent has the specific knowledge. We show that uncertainty does not...

Using the classic moral hazard problem with limited liability we characterize the optimal contracts when an other-regarding principal interacts with a self-regarding agent. The optimal contract differs considerably when the principal is ‘inequity averse’ vis-a-vis the self-regarding case....

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...

The relationship between physician and patient has been discussed intensively in the literature. Nevertheless, they neglect the fact that the production of health not only depends on the medical services supplied by the physician but is also influenced by the patient's compliance. We present a...

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...

Given that an owner cannot commit to her timing strategy under a manager's hidden action, we consider (i) how the owner's timing decisions to launch a project and to replace the manager or change a project are determined, and (ii) how the optimal compensation contract for the manager is...