This paper examines the self-enforcing conditions of linear contracts commonly used in agriculture. In a repeated game between a risk neutral principal and a risk averse agent, I show that when contracts are constrained by the requirement of being self-enforcing, risk aversion and variance can...

We present a wage-hours contract designed to minimize costly turnover given investments in specific training combined with firm and worker information asymmetries. It may be optimal for the parties to work ‘long hours’ remunerated at premium rates for guaranteed overtime hours. Based on...

Subjective evaluations are widely used, but call for different contracts from classical moral-hazard settings. Previous literature shows that contracts require payments to third parties. I show that the (implicit) assumption of deterministic contracts makes payments to third parties necessary....

Competition between insurance companies for employees of a firm often increases the prices and reduces the availability of high-quality health plans offered to employees. An insurance company can reduce competition by signing an exclusive contract, which guarantees that the company is the only...

We examine optimal dynamic contracts when the firm's production generates harmful pollution undermining its productivity. The optimal contract rewards for financial performance and penalizes pollution. The combination of both contract sensitivities incentivizes the agent's effort and...

Trust between parties should drive contract design: if parties were suspicious about each others' reaction to unplanned events, they might agree to pay higher costs of negotiation ex ante to complete contracts. Using a unique sample of U.S. consulting contracts and a negative shock to trust...

We consider a situation where an agent's effort is monitored by a supervisor who cares for the agent's well being. This is modeled by incorporating the agent's utility into the utility function of the supervisor. The first best solution can be implemented even if the supervisor's preferences are...