IZA DP No. 342: The Virtue of Being Underestimated: A Note on Discriminatory Contracts in Hidden Information Models
published in: Economics Letters, 2002, 75 (2), 171-178
A standard hidden information model is considered to study the influence of the a priori productivity distribution on the optimal contract. A priori more productive (hazard rate dominant) agents work less, enjoy lower rents, but generate a higher expected surplus.