A number of studies exist in relation to monitoring/regulation of complex forms of water operations management contracts, particularly leases and concessions. The latter are implemented, more rationally, in operating environments where perceived market entry risks have been adequately mitigated prior to actual implementation of reforms. In these cases, it is possible to implement incentive acti...

This paper contrasts models of common agency in which principals compete in incentive contracts (that is, they make take it or leave it offers) with models where principals offer agents menus of incentive contracts from which the final contract is negotiated. It is shown that pure strategy equilibria in incentive contracts are robust to the possibility that principals might offer menus. In addi...

When a principal and an agent operate with simple contracts, in equilibrium, renegotiation will occur after the agent takes her action. Since renegotiation makes incentive contracts non-credible, the principal may prefer non-renegotiable monitoring options. The current literature does not fully reconcile these predictions with the observation of simple, non-renegotiated incentive contracts. We ...

This paper analyzes optimal non-linear portfolio management contracts. We consider a setting where the investor faces moral hazard with respect to the effort and risk choices of the portfolio manager. The manager’s employment contract promises her: (a) a fixed payment, (b) a proportional asset-based fee, (c) a benchmark-linked fulcrum fee, and (d) a benchmark-linked option-type “bonus” incentiv...

This paper analyzes optimal incentive contracts for information acquisition and revelation. A decision maker faces the problem to design a contract that provides an expert with incentives to acquire and reveal information. We show that it is in general not optimal to reward the expert if his recommendation is confirmed. The common observation that experts are paid when their recommendation is c...

This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents, who can observe each others’ effort levels and draft enforceable side–contracts on chosen effort levels and realized returns. After showing that standard constraints, resulting in incentive–contracts, may fail to ensure implement...