We solve a long-term contracting problem with symmetric uncertainty about the agent's quality and a hidden action of the agent. As information about quality accumulates, incentives become easier to provide because the agent has less room to manipulate the principal's beliefs. This result is opposite to that in the literature on "career concerns" in which incentives via short-termcontracts become harder to provide as the agent's quality is revealed over time.
- Optimal contract
- Principal-agent model
- Private information
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)