Dynamic Contracting with Flexible Monitoring

Should the Timing of Inspections be Predictable?

“…To solve for the optimal inspection policy in our model, we explicitly consider 5 Most subsequent work on dynamic contracts analyzes monitoring of current actions; see Antinolfi and Carli (2015); Piskorski and Westerfield (2016); Chen et al (2020); Li and Yang (2020); Dai et al (2022); Rodivilov (2022); Wong (2022). In Halac and Prat (2016) and Dilmé and Garrett (2019), the principal's investment has a persistent effect on her monitoring capabilities, but monitoring still reveals information about current actions only.…”

Relational enforcement

“…88 For dynamic moral‐hazard problems in which monitoring reveals the current action, see Antinolfi and Carli (2015), Piskorski and Westerfield (2016), Dilmé and Garrett (2019), Chen, Sun, and Xiao (2020), Li and Yang (2020), Dai, Wang, and Yang (2022), Wong (2022). For dynamic adverse‐selection problems in which verification reveals the agent's current information that is independent and identically distributed (i.i.d.)…”