Discussion of Optimal Employment Contracts and the Returns to Monitoring in a Principal-Agent Context

The article presents a commentary on an article published earlier in this journal titled "Optimal employment contracts and the returns to monitoring in a principal-agent context," by Stanley Baiman, Jerrold H. May, and Arijit Mukherji (BMM). The author raises concerns about the problem and model formation, focusing on the assumptions that are restrictive and have no economic implications. Additionally, the author suggests concern over the applicability and analysis of three cases in Proposition I and the comparative statics results. The author suggests that further research might expand the BMM study to include a multi or two-period world model to understand additional labor market effects and risk aversion.