  Firms have access to abundant data on market participants. They use these
data to target contracts to agents with specific characteristics, and describe
these contracts in opaque terms. In response to such practices, recent proposed
regulations aim to increase transparency, especially in digital markets. In
order to understand when opacity arises in contracting and the potential
effects of proposed regulations, we study a moral hazard model in which a
risk-neutral principal faces a continuum of weakly risk-averse agents. The
agents differ in an observable characteristic that affects the payoff of the
principal. In a described contract, the principal sorts the agents into groups,
and to each group communicates a distribution of output-contingent payments.
Within each group, the realized distribution of payments must be consistent
with the communicated contract. A described contract is transparent if the
principal communicates the realized contract to the agent ex-ante, and
otherwise it is opaque. We provide a geometric characterization of the
principal's optimal described contract as well as conditions under which the
optimal described mechanism is transparent and opaque. We apply our results to
the design and description of driver payment schemes on ride-hailing platforms.
