Dynamic Contracts and Learning by Doing (Prat, 2014)

This paper studies the design of optimal contracts in dynamic envi-

ronments 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 cap-

ital accumulation strengthens the power of incentives and allows the

principal to provide the agent with better insurance against transitory

risks.

(Prat, 2014)

Presentation

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