Contractual Incentives and Career Concerns
24 Pages Posted: 19 Aug 2014
Date Written: August 18, 2014
In a multi-period model of optimal contracting and career concerns, we show long-term contracting with renegotiation dominates short-term contracting if there is non-contractible information. If the non-contractible information is not effectively contractible through renegotiation of long-term contracts, the labor market may play an important role in providing incentives in a world of multiple information sources and several tasks.
Keywords: dynamic agency, renegotiation, career concerns, non-contractible information
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