reductions is to encourage reductions in deforestation. But any such strategy must confront a basic problem: agents that might be … likely to differ in their tolerance for risk. In this paper, I investigate a contracting scheme designed to mitigate the … asymmetric information problem where agents are heterogeneous in their tolerance for risk. Mechanisms that recognize the …

argue that the second-best contract in general consists of two sharing rules: one for realized outcome and the other for …

-telling incentive to herself, which, in turn, lowers the cost of inducing the agent to accept the contract …

cost. The robust contract generates a seemingly excessive pay-performance sensitivity. The worst-case effort cost is high … contract is misspecified, i.e., when he is offered the robust contract, but his true effort cost is constant. I find that … organizations, most notably risk-shifting and the quiet life …

principal is ambiguity averse, and designs a contract which is robust to the worst case effort cost process. Ambiguity divides … the contract into two regions. After sufficiently high performance, the agent reaches the over-compensation region, where … he receives excessive benefits compared to the contract without ambiguity, while after low performance, he enters the …

prevents the power of the contract to equal one even when the agent is risk-neutral, thus, rendering a fixed-rent contract sub-optimal. … inefficiency. We consider the case where the type of the principal is endogenous to contract provisions and reneging by the … show that the general contract derived nests the usual textbook contract when TPE is strong; weak TPE on the other hand …

energy from two risk-averse generators. We contrast outcomes arising when investments are set in centralised and …

reductions is to encourage reductions in deforestation. But any such strategy must confront a basic problem: agents that might be … likely to differ in their tolerance for risk. In this paper, I investigate a contracting scheme designed to mitigate the … asymmetric information problem where agents are heterogeneous in their tolerance for risk. Mechanisms that recognize the …

optimally offers a contract that makes the agent's utility concave in output. If the agent is risk-neutral and protected by …Consider an agent who can costlessly add mean-preserving noise to his output. To deter such risk-taking, the principal … limited liability, this concavity constraint binds and so linear contracts maximize profit. If the agent is risk averse, the …

, we study the implications of the interaction between incentive compatibility and participation constraints for risk … endowment shock is small enough, the optimal contract prevents agents from reaching autarky tomorrow and, thus, from being …