CIRJE-F-896 "Multiperiod Contract Problems with Verifiable and Unverifiable Outputs"
Author Name

Kamiya, Kazuya and Meg Adachi-Sato

Date July 2013
Full Paper   PDF file
Remarks  Revised version of CIRJE-F-800 (2011).

Why do some employees receive only …xed or incentive pay, while others receive a mix of …xed and incentive pay? Moreover, why do the lengths of wage contracts di¤er across these types of pay? This paper attempts to respond to this economic puzzle by developing a theoretical model of multiperiod contracts that incorporates short-, medium-, and long-term contracts with di¤erent wage pro…les. We obtain di¤erent combinations of these contracts as equilibria when the e¢ ciency of investment in human capital changes endogenously over time.