Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
956728 | Journal of Economic Theory | 2013 | 21 Pages |
Abstract
This paper analyzes optimal contracting when an agent has private information before contracting and exerts hidden effort that stochastically affects the output. Additionally, the contract is constrained to satisfy the agentʼs ex post participation. We highlight three features of this model. First, the agent faces countervailing incentives. Second, the separation of types is never optimal. Third, the optimal constant bonus rewarding success is distorted downward below its efficient level.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Sandrine Ollier, Lionel Thomas,