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
Authors:	Prat, Julien
Publisher:	Bonn : Institute for the Study of Labor (IZA)
Subject:	human capital \| principal agent problem \| moral hazard

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Series:	IZA Discussion Papers ; 7961
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	779295749 [GVK] hdl:10419/93343 [Handle] RePEc:iza:izadps:dp7961 [RePEc]
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:	EconStor

Persistent link: https://www.econbiz.de/10010333325