Contracting Timely Delivery with Hard to Verify Quality

摘要: I study a continuous-time principal-agent model with hidden effort and imperfect monitoring about project quality. consider situation in which the agent can manipulate output so as to reduce completion time of at expense In order deter manipulation principal must make payments contingent on subsequent performance project. The balances provision incentives exert cost deferring compensation. Unlike previous models pure moral hazard, may never be terminated. Moreover, if optimal contract requires termination, this unpredictable. If were not case would when he is close being fired. analyze commit mixed strategy also where cannot terminate agent. latter case, termination has incentive compatible for principal. contract, cash compensation deferred longer than absence manipulation. Finally, observe that contracts have duration quality more difficult observe.