The ratchet effect is markedly simplified by assuming that the disutility of effort is linear and that there are two types of worker. A single-period model presents the participation (individual-rationality) and incentive-compatibility constraints. In a two-period model a pooling and two types...

We consider a contracting relationship where the agent's effort induces monetary costs, and limits on the agent's resource restrict his capability to exert effort. We show that the principal finds it best to offer a sharing contract while providing the agent with an up‐front financial transfer...