Job Market Paper
This paper studies the joint design of optimal incentive pay and information disclosure in a dynamic moral hazard problem. The principal is more informed about the outcomes of agent's actions and actively manages information available to the agent. Sharing information with the agent increases productivity (for example, allowing a better allocation of resources or effort), but increases the cost of providing incentives. The optimal contract features incomplete information sharing with positive information shared more than negative information and past negative information leading to less information sharing in the future.
Why should we reward failures? When there is uncertainty about correct long term strategy and management has to experiment with many alternatives it may be optimal to reward success of some directions more the later this success is observed. Moreover there will be a nontrivial region when the agent will be willing to work on a specific task for free.