This paper analyzes the occurrence of renegotiation costs in dynamic, binary agency models with a risk‐averse agent. I investigate technological interdependence arising from complementary tasks or substitutable tasks across periods. In addition, I analyze stochastic interdependence between...

In this paper the impact of ability and learning potential on incentive contracts is analyzed. A central feature of the model is that the true ability will not be revealed. The learning potential of an agent is modeled as the magnitude of impact on the agent's expected ability that...