contracts makes payments to third parties necessary. This paper studies incentive contracts with stochastic compensation, like … compared to deterministic contracts. My results also address the puzzle about the prevalence of labor contracts with stochastic … compensation. …

contracts makes payments to third parties necessary. This paper studies incentive contracts with stochastic compensation, like … compared to deterministic contracts. My results also address the puzzle about the prevalence of labor contracts with stochastic … compensation. …

-dependent preferences. We show that stochastic compensation for low performance can be optimal. Because of loss aversion, the agents have … stochastically compensated. We also examine team incentives for credibly employing such stochastic compensation. In an optimal …