OxTalks will soon be transitioning to Oxford Events (full details are available on the Staff Gateway). A two-week publishing freeze is expected in early Hilary to allow all events to be migrated to the new platform. During this period, you will not be able to submit or edit events on OxTalks. The exact freeze dates will be confirmed as soon as possible.
If you have any questions, please contact halo@digital.ox.ac.uk
We study a principal-agent model with imperfectly contractible actions and a cost of determining what is contractible. If contractibility costs satisfy a monotonicity property—-implied by any arbitrarily small difficulty in distinguishing actions when writing the contract—-then optimal contracts are necessarily coarse, specifying finitely many actions out of a continuum. By contrast, costs of enforcing a contract affect allocations but yield complete contracts. We provide first-order conditions that describe the structure of optimally coarse contracts. Applying these results, the model rationalizes discrete pay grades in employment contracts. The presence of private information about productivity coarsens the optimal pay scale.
