We attempt to formulate and explain two types of self-fulfilling prophecy, called the Pygmalion effect (if a supervisor thinks her subordinates will succeed, they are more likely to succeed) and the Galatea effect (if a person thinks he will succeed, he is more likely to succeed). To this...

We analyze relational incentive contracts with hidden action when the principal and the agent have different discount factors, and identify a new agency cost that exists only when they cannot commit themselves to long-term contracts and the agent is more patient than the principal. We show that...