Maybe I will have to edit the text to make that clearer, but: the optimal contract in the situation I described (moral hazard with binary states and effort levels) punishes only for bad luck, exactly because it makes the worker choose high effort. In this sense, once revenue is known, you also know that it is not the worker’s fault that revenue is low. From an ex-ante perspective, it offers conditional wages that “would” punish for being lazy, however.
You’re right—but the basic literature on principle agent dynamics corrects this simple model to properly account for non-binary effort and luck, and I think that is the better model for looking at luck and effort.
Maybe I will have to edit the text to make that clearer, but: the optimal contract in the situation I described (moral hazard with binary states and effort levels) punishes only for bad luck, exactly because it makes the worker choose high effort. In this sense, once revenue is known, you also know that it is not the worker’s fault that revenue is low. From an ex-ante perspective, it offers conditional wages that “would” punish for being lazy, however.
You’re right—but the basic literature on principle agent dynamics corrects this simple model to properly account for non-binary effort and luck, and I think that is the better model for looking at luck and effort.