Essays in Contract Theory

Abstract

The dissertation consists of three chapters. The fist two chapters use principal-agent models to analyze optimal contract design under the assumption that the contract can induce the agent to acquire relevant private information. Specifically, Chapter 1 demonstrates the use of stochastic contracts, and Chapter 2 demonstrates the use of sequential screening mechanisms. Chapter 3, on the other hand, offers an explanation as to why incentive pay sometimes depends on subjective performance evaluations even though comprehensive objective appraisal systems seem feasible.