This paper studies optimal contracting under synergies. We define influence as the extent to which effort by one agent reduces a colleague's marginal cost of effort, and synergy to be the sum of the (unidimensional) influence parameters across a pair of agents. In a two-agent model, effort...

I explicitly derive the optimal dynamic incentive contract in a standard continuous-time agency setting where the agent has a shirking action. My solution generates two dynamic contracts new to the literature. Both contracts include phases when the agent frequently shirks. In one contract, the...