In a pioneering approach towards the explanation of the phenomenon of 'yes man' behavior in organizations, Prendergast (1993) argued that incentive contracts in employment relationships generally make a worker distort his privately acquired information. This would imply that there is a trade-off...

In a pioneering approach towards the explanation of the phenomenon of "yes man" behavior in organizations, Prendergast [American Economic Review 83 (1993) 757-770] argued that incentive contracts in employment relationships generally make a worker distort his privately acquired information. This...

We revisit the contract-theoretic literature on privatization initiated by Hart et al. (1997). This literature has two major shortcomings. First, it is focused on ex-ante investment incentives, whereas ex-post inefficiencies which are ubiquitous in the real world cannot be explained. Second,...