Dynamic contracts and learning by doing

Julien Prat

doi:10.1007/s11579-014-0120-6

Dynamic contracts and learning by doing

Julien Prat

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Résumé

This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation strengthens the power of incentives and allows the principal to provide the agent with better insurance against transitory risks.

langue originale	Anglais
Pages (de - à)	169-193
Nombre de pages	25
journal	Mathematics and Financial Economics
Volume	9
Numéro de publication	3
Les DOIs	https://doi.org/10.1007/s11579-014-0120-6
état	Publié - 1 juin 2015
Modification externe	Oui

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10.1007/s11579-014-0120-6

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title = "Dynamic contracts and learning by doing",

abstract = "This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation strengthens the power of incentives and allows the principal to provide the agent with better insurance against transitory risks.",

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AB - This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation strengthens the power of incentives and allows the principal to provide the agent with better insurance against transitory risks.

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KW - Moral hazard

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Dynamic contracts and learning by doing

Résumé

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