Final goods producers, who may be intrinsically honest (a behavioral type) or opportunistic (strategic), play a repeated game of imperfect information with suppliers of an input of variable (and non-verifiable) quality. Returns to cheating are increasing in the proportion of intrinsically honest...

We study the role of information exchange, leadership and coordination in team or partnership structures. For this purpose, we view individuals jointly engaging in productive processes -- a 'team' -- as endowed with individual and privately held information on the joint production process. Once...

We analyze the complementarity between legal incentives (the threat of being held liable for damages) and normative incentives (the fear of social disapproval or stigma) in situations where instances of misbehavior are not perfectly observable. There may be multiple equilibria within a given...

Following tournament theory, incentives will be rather low if the contestants of a tournament are heterogeneous. We empirically test this prediction using a large dataset from the German Hockey League. Our results show that indeed the intensity of a game is lower if the teams are more...

We analyze the efficiency properties of the negligence rule with liability insurance, when the tort-feasor's behavior is imperfectly observable both by the insurer and the court. Efficiency is shown to depend on the extent to which the evidence is informative, on the evidentiary standard for...

Firm insiders – a manager and a board – face moral hazard in relation to their outside shareholders in a repeated game with asymmetric information and stochastic market outcomes. The manager determines whether or not outsiders are cheated; the board, whose objectives differ from those of...

This paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece rate contracts. Many principals reward high efforts on both...