Optimal contract, imperfect output observation, and limited liability

Article Abstract:

A standard adverse selection model is analyzed to determine an optimal incentive scheme for agents with contracts that are imperfectly observed. The imperfect observation of the output of optimal contracts may result to several changes in the status of said contracts. Statistical results indicate that highly-productive agents may be required to exert efforts lower that the one required for low-productivity agents.

Productivity, Models, Labor contracts, Labor productivity

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Optimal fiscal and monetary policy under sticky prices

Article Abstract:

The optimal fiscal and monetary policy under sticky prices whose stickiness is related to the ability of the government to make non-state contingent liabilities to state contingent in real terms is reviewed. Price stickiness induces deviation from the Friedman rule.

United States, Analysis, Monetary policy, Pricing policies

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