We consider how a principal can use randomized strategies in designing optimal contracts in agency settings. We distinguish between ex post randomization (over fee schedules following act selection by the agent) and ex ante randomization (over fee schedules before act selection). We show that ex...

This teaching note illustrates how reporting historical data, even when it is unverifiable, can be useful in improving productive efficiency. Historical cost accounting is evaluated in a simple multi-person setting with private information. Because the source of contracting frictions is limited...

A simple two-period model with information asymmetry and restriction on transfers is used to induce an inter temporal relationship between a sequence of investment decisions. The owner's reputation for honoring commitments to ex post inefficient production decisions allows her to make efficient...

This paper presents a principal-agent model in which subsequent to contracting the risk averse agent becomes informed about the production process. Communication of the agent's information is always valuable. The optimal contract given this information asymmetry is characterized by less...

This paper analyzes the role of the agent's bankruptcy constraints in multiperiod principal-agent models with asymmetric information. Conditions are provided under which commitment to a long-term contract involving N rounds of investment improves upon repetition of N identical single-period...