This paper analyzes relational contracts under moral hazard. We first show that if the available information (signal) about effort satisfies a generalized monotone likelihood ratio property, then irrespective of whether the first-order approach (FOA) is valid or not, the optimal bonus scheme...

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...

Two jurisdictions compete to capture the rents of a large multinational enterprise (MNE) which invests locally and which is partly owned by local investors. The MNE contributes to local welfare by tax payments and dividents, and it has private information about the efficiency of the operations...