We study dynamic contracting with adverse selection and limited commitment. A firm (the principal) and a worker (the agent) interact for potentially infinitely many periods. The worker is privately informed about his productivity and the firm can only commit to short-term contracts. The ratchet...

We study dynamic contracting with adverse selection and limited commitment. A firm (the principal) and a worker (the agent) interact for potentially infinitely many periods. The worker is privately informed about his productivity and the firm can only commit to short-term contracts. The ratchet...

Laffont and Tirole [3] show that when the uncertainty about the agent's ability is small, the equilibrium must involve a large amount of pooling, but it is not necessary to be a partition equilibrium. They construct a nonpartition continuation equilibrium for a given first-period menu of...

Laffont and Tirole (1988) show that when the uncertainty about the agent's ability is small, the equilibrium must involve a large amount of pooling, but whether the continuation equilibrium induced by a optimal first-period menu of contracts is partition or not remains unclear. They construct a...

Strategic delegation to an independent regulator with a pure consumer standard improves dynamic regulation by mitigating ratchet effects associated with short term contracting. A consumer standard alleviates the regulator’s myopic temptation to raise output after learning the firm is...

Strategic delegation to an independent regulator with a pure consumer standard improves dynamic regulation by mitigating ratchet effects associated with short term contracting. A consumer standard alleviates the regulator's myopic temptation to raise output after learning the firm is...

We study the relation between firm growth and managerial incentive provision under moral hazard when a long-lived firm is operated by a sequence of managers. In our model, firms replace their managers not only upon poor performance to provide incentives, but also when outside managers are at a...

This paper generalizes a conceptual insight in dynamic contracting with quasilinear payoffs: the principal does not need to pay any information rents for extracting the agent's 'new' private information obtained after signing the contract. This is shown in a general model in which the agent's...

I show that deterministic dynamic contracts between a principal and an agent are always at least as profitable to the principal as stochastic ones, if the so-called first-order approach in dynamic mechanism design is satisfied. The principal commits, while the agent\'s type evolution follows a...

This paper generalizes a conceptual insight in dynamic contracting with quasilin- ear payoffs: the principal does not need to pay any information rents for extract- ing the agent’s “new” private information obtained after signing the contract. This is shown in a general model in which the...