The average pay of a chief executive officer (CEO) in a top U.S. firm has increased six-fold in the last three decades. Simultaneously, the composition of pay has moved away from salary-based and increasingly toward performance-based compensation in the form of stock grants and stock option...

I study a problem of repeated moral hazard in which the effect of effort is persistent over time: each period's outcome distribution is a function of a geometrically distributed lag of past efforts. I show that when the utility of the agent is linear in effort, a simple rearrangement of terms in...

We study the problem of a firm that faces asymmetric information about the productivity of its potential workers. In our framework, a worker’s productivity is either assigned by nature at birth, or determined by an unobservable initial action of the worker that has persistent effects over...

We present a sequence of two-period models of incentive-based compensation in order to understand how the properties of optimal compensation structures vary with changes in the model environment. Each model corresponds to a different occupation within a bank, such as credit line managers, loan...

We study a multiperiod principal-agent problem with moral hazard in which effort is persistent: the agent is required to exert effort only in the initial period of the contract, and this effort determines the conditional distribution of output in the following periods. We provide a...

We say that a large financial institution is "resolvable" if policymakers would allow it to go through unassisted bankruptcy in the event of failure. The choice between bankruptcy or bailout trades off the higher loss imposed on the economy in a potentially disruptive resolution against the...