We study an optimal long-term labor contract that provides disability insurance benefits under two frictions: the agent cannot commit to a long-term contract and the disability shock is private information. We predict that a job with a high risk of disability should provide a higher level of...

This paper presents a dual approach to the standard agency model. We formulate the dual of the principal-agent problem under the assumption that the incentive constraint can be replaced by a local constraint (the first-order approach), to examine whether the relaxed agency problem yields a...

This paper presents a dual approach to the standard agency model. We formulate the dual problem corresponding to the principal-agent problem under the assumption that the firstorder approach (FOA) is valid. This dual formulation generates a convex conjugate of a distinctive form, which...

Recent empirical studies conclude that small firms have higher but more variable growth rates than large firms. To explore the effect of this size-dependence regularity on moral hazard and investment, we develop a continuous-time agency model with time-varying firm size. Firm size is a diffusion...

This note explores how to evaluate an agent's performance in standard incentive contracts. We show that the MPS criterion proposed by Kim (1995) becomes a tight condition for one performance measurement system to be more informative than another, as long as the first-order approach can be...

This paper presents a dual approach to the standard agency model. We formulate the dual problem corresponding to the principal-agent problem under the assumption that the firstorder approach (FOA) is valid. This dual formulation generates a convex conjugate of a distinctive form, which...