This paper studies how anticipated disagreement between a financier and an entrepreneur affects optimal contracting and asset prices. The value of debt is uniquely immune to anticipated disagreement, and when the set of anticipated disagreements is sufficiently rich, this immunity causes the optimal contract to give the financier debt. In contrast, the values of other contracts, including equity, decline as anticipated disagreement becomes more severe. This suggests a channel through which an increase in the severity of anticipated disagreement increases the equity premium and the debt-to-equity ratio.

I consider a dynamic principal-agent setting in which the agent repeatedly chooses between hidden long-term and short-term actions. Relative to the long-term action, the short-term action boosts output today but hurts output tomorrow. I explicitly characterize the optimal contract that always induces the long-term action. It features a cliff-like arrangement that rewards high output today based on the streak of consecutive high outputs the agent has generated leading up to today: The longer the streak, the larger the reward. The optimal contract can be implemented as a bonus bank. Bonus banks feature prominently in the recent debate on bonus reform. I shed light on the opposing arguments driving this debate by formally comparing the myopic agency optimal contract and optimal contracts that arise from traditional effort-shirking agency models.

I explicitly derive the optimal dynamic incentive contract in a standard continuous-time agency setting where the agent has a shirking action. My solution generates two dynamic contracts new to the literature. Both contracts include phases when the agent frequently shirks. In one contract, the shirking phases are relaxation periods rewarding the agent for good performance. In the other, the shirking phases are suspension-type arrangements punishing the agent for poor performance. In addition, I also explore the relationships between optimal contracting and taxes, bargaining, and renegotiation.

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We implement a field experiment to examine how part-time work attracts applicants with different productivity than full-time work. In a large-scale recruitment drive for a data-entry position in Ethiopia, either a part-time or full-time job opportunity was randomly offered. We find that part-time work attracts less qualified applicants with lower productivity but stronger preferences for short work hours. Our estimates show this selection effect may explain about half of the typical part-time wage penalty, which is about 25%. A simple model demonstrates how lack of high-quality workers with strong preference for short work hours could explain the experimental findings.