Relational incentive contracts with productivity shocks

@article{Malcomson2015RelationalIC,
  title={Relational incentive contracts with productivity shocks},
  author={James M. Malcomson},
  journal={Games Econ. Behav.},
  year={2015},
  volume={92},
  pages={122-137}
}
This paper extends Levin's (2003) relational contract model by having not only the agent's cost of effort (agent's type), but also the value of that effort to the principal (principal's type) subject to i.i.d. shocks. When optimal effort is fully pooled across agent types for multiple principal types, it is also pooled across those principal types. When optimal effort separates some agent types for multiple principal types, efforts of those agent types may be separated across principal types… CONTINUE READING

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