The Principal-Agent Model When Agents Can Make Mistakes
This paper examines the principal-agent model when the agent can make a mistake by providing the" wrong" effort level. How the contract is affected depends on (1) whether mistakes can be positive or negative or are always negative and (2) whether the cost of effort depends on intended effort or actual effort.
Thistle, P. D.
The Principal-Agent Model When Agents Can Make Mistakes.