This article surveys the literature on principal-agent problems with moral hazard that gained popularity following the seminal works of Mirrlees (1976), Holmström (1979), and others. This literature is concerned with designing incentives to motivate one or more workers—typically by paying for...

We introduce uncertainty into Holmstrom and Milgrom (1987) to study optimal long-term contracting with learning. In a dynamic relationship, the agent's shirking not only reduces current performance but also increases the agent’s information rent due to the persistent belief manipulation...

For the classic agency model (Holmström, 1979), under different assumptions, we offer a completely different solution than the standard solution in the literature. Our optimal contract has a closed form, offers a contingent fixed payment, and is efficient. In contrast, the standard contract in...

We develop a model of contracting in which individual effort choices are subject to social pressure to conform to the average effort level of others in the same risk-sharing group. As in related models of social interactions, a change in exogenous variables or contract terms generates a social...

One major difficulty with the standard agency model is that it generally does not provide a closed-form solution. A second major difficulty is that the theory relies on the troublesome first-order approach. To avoid these difficulties but at the same time to allow a general utility function,...

This paper addresses the class of agency problems with a risk-neutral principal and a risk-averse agent where hidden action and hidden information (on the agent's efficiency) are jointly present. The commonly used technological assumptions - such as the monotone-likelihood-ratio property (MLRP)...

At an interim stage players possessing only their private information freely communicate with each other to coordinate their strategies. This results in a core strategy, which is interpreted as an equilibrium set of players' alternative type-contingent contract offers to their fellows. From this...

This paper extends the standard principal-agent model with moral hazard to allow for agents having reference-dependent preferences according to Köszegi and Rabin (2006, 2007). The main finding is that loss aversion leads to fairly simple contracts. In particular, when shifting the focus from...

A repeated moral hazard setting in which the Principal privately observes the Agent's output is studied. It is shown that there is no loss from restricting the analysis to contracts in which the Agent is supposed to exert effort every period, receives a constant efficiency wage and no feedback...

The current literature on sharing contracts emphasizes the importance of asymmetric information and typically assumes that one party is risk neutral while the other is risk averse. This paper describes a real-world contract that is widely used - the movie exhibition contract - and argues that...