Incentives for Information Production and Optimal Job Assignment with Human Capital Considerations.

In this paper, the authors examine the problem of inducing a manager to acquire information that is useful in determining his optimal job assignment but which might also adversel y affect his market value. The authors show that spot contracts are optimal and generate the first-best effort level when the manager is risk-neutral. When the manager is risk-averse, the optimal contract consists either of a partial insurance contract against downward revisions in compensation or a competitive spot contract, depending upon the nature of prior information. Copyright 1993 by The London School of Economics and Political Science.