The gig economy, where employees take short-term, project-based jobs, is
increasingly spreading all over the world. In this paper, we investigate the
employer's and the worker's behavior in the gig economy with a dynamic
principal-agent model. In our proposed model the worker's previous decisions
influence his later decisions through his dynamically changing participation
constraint. He accepts the contract offered by the employer when his expected
utility is higher than the irrational valuation of his effort's worth. This
reference point is based on wages he achieved in previous rounds. We formulate
the employer's stochastic control problem and derive the solution in the
deterministic limit. We obtain the feasible net wage of the worker, and the
profit of the employer. Workers who can afford to go unemployed and need not
take a gig at all costs will realize high net wages. Conversely, far-sighted
employers who can afford to stall production will obtain high profits