When a principal’s monitoring information is private (non-verifiable), the agent should be concerned that the principal could misrepresent the information to reduce the agent’s wage or collect a monetary penalty. Restoring credibility may lead to an extreme waste of resources - the so-called...

When the information used by a principal to monitor an agent is private, and thus non-verifiable by a third party, the principal has a credibility issue with the agent. The agent should be concerned that the principal could misrepresent the information in order to collect a monetary penalty from...

Before embarking on a project, a principal must often rely on an agent to learn about its profitability. We model this learning as a two-armed bandit problem and highlight the interaction between learning (experimentation) and production. We derive the optimal contract for both experimentation...

An agent may manipulate information when transmitting it to the principal. A direct response to this problem is to verify the information. The paper explores a situation where the principal engages in information verification herself or alternatively delegates it to the agent. The paper finds...