We analyze a rational-expectations model of information acquisition and price formation in an intermediate- good market: prices and net supply are non-negative, there are no noise traders, and the intermediate good has multiple potential uses. Several of our results differ from the classic...

We develop a model in which a worker's skills determine the worker's current wage and sector. Both the market and the worker are initially uncertain about some of the worker's skills. Endogenous wage changes and sector mobility occur as labor-market participants learn about these unobserved...

We analyze the role of implicit contracts' (that is, informal agreements supported by" reputation rather than law) both within firms, for example in employment relationships between them, for example as hand-in-glove supplier relationships. We find that the optimal" organizational form is...

This paper studies career concerns -- concerns about the effects of current performance on future compensation -- and describes how optimal incentive contracts are affected when career concerns are taken into account. Career concerns arise frequently: they occur whenever the market uses a...

We attempt to explain employment practices in internal labor markets using models that combine job assignment, on-the-job human-capital acquisition, and learning. We show that a framework that integrates these familiar ideas captures a number of recent empirical findings concerning wage and...

In this paper I summarize four new strands in agency theory that help me think about incentives in real organizations. As a point of departure, I being with a quick sketch of the classic agency model. I then discuss static models of objective performance measurement in which firms get what they...

We develop a dynamic model of learning and wage determination: education may convey initial information about ability, but subsequent performance observations also are informative. Although the role of schooling in the labor market's inference process declines as performance observations...

This paper surveys two related pieces of the labor-economics literature: incentive pay and careers in organizations. In the discussion of incentives, I first summarize theory and evidence related to the classic agency model, which emphasizes the tradeoff between insurance and incentives. I then...

Investment decisions require trading off current expenditures against future revenues. If revenues extend far enough into the future, the executives responsible for designing long-run investment policy may no longer be in office by the time all the revenues are realized. We present evidence...