Dynamic Contracts and Learning by Doing

This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation strengthens the power of incentives and allows the principal to provide the agent with better insurance against transitory risks.

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Year of publication:	2014-02
Authors:	Prat, Julien
Institutions:	Institute for the Study of Labor (IZA)
Subject:	human capital \| principal agent problem \| moral hazard

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Extent:	application/pdf
Series:	IZA Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	Number 7961 31 pages
Classification:	D82 - Asymmetric and Private Information ; D83 - Search, Learning, Information and Knowledge ; J24 - Human Capital; Skills; Occupational Choice; Labor Productivity ; J41 - Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010744663