Economics, Econometrics and Finance
4 years ago

New study reveals how to optimize contracts for maximum efficiency.

2 views
RePEc: Research Papers in Economics
Dynamic Contracts with Moral Hazard and Adverse Selection
Alex Gershkov, Motty Perry

Paper Summary

The article explores how to create fair contracts when one person has more information than the other in a series of tasks. The person with private information decides whether to accept each task and how much effort to put in. The study finds that with the right contracts, the person's happiness can be close to what it would be if everyone knew their skills.

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