I study firm characteristics that justify the use of options or refresher grants in the optimal compensation packages for CEOs in the presence of moral hazard. I model explicitly the determination of stock prices as a function of the output realizations of the firm: Symmetric learning by all...

This paper investigates relational incentive contracts with continuous, privately-observed agent types that are persistent over time. With fixed agent types, full separation is not possible when continuation equilibrium payoffs following revelation are on the Pareto frontier of attainable...

We examine the nature of contracts that optimally reward innovations in a risky environment, when the innovator is privately informed about the quality of her innovation and must engage an agent to develop it. We model the innovator as a principal who has private but imperfect information about...

This paper examines the optimal provision of incentives for contract designers. A principal hires an agent to draft a contract that is incomplete because the ex-ante specified design might not be appropriate ex-post. The degree of contract incompleteness is endogenously determined by the effort...

We consider an in nitely repeated reappointment game in a principal- agent relationship. Typical examples are voter-politician or government- public servant relationships. The agent chooses costly effort and enjoys being in office until he is deselected. The principal observes a noisy signal of...

Before embarking on a project, a principal must often rely on an agent to learn about its profitability. We model this learning as a two-armed bandit problem and highlight the interaction between learning (experimentation) and production. We derive the optimal contract for both experimentation...

We study a dynamic multi-agent model with a verifiable team performance measure and non-verifiable individual measures. The optimal contract can be interpreted as an explicit contract that specifies a minimum bonus pool as a function of the verifiable measure and an implicit contract that gives...

We modelize and investigate the analytical rationale of employing bilateral mechanism design, which simplifies collective mechanism design by ignoring relative information evaluation, in generalized multi-agency contracting games under Bayesian Nash equilibrium. We permit interdependent...

We analyze a principal-supervisor-two-agent hierarchy with soft information. The supervisor may be inefficient such that a noisy signal on the agents’ effort levels is observed. On one hand, the agents require risk premiums to work due to the noisy signal. On the other hand, the supervisor and...

A number of the largest U.S. firms have been found guilty of labor discrimination despite having policies in place designed to avoid that outcome. This paper diagnoses the phenomenon and proposes contractual and regulatory solutions to ameliorate the situation. Existing research (e.g., Becker...