This paper studies a principal-agent model with third-party auditing. Auditing technologies are distinguished according to the quantity (frequency) and the quality (accuracy) of the information they deliver. We show that the frequency of audits is irrelevant if the auditor either is honest or...

This paper investigates a team production problem where two parties invest sequentially to generate a joint surplus. We find that the first best can be implemented even if the investment return is highly uncertain. The optimal contract entails a basic dichotomy: it is a simple option contract if...