Risk-neutral individuals take more risky decisions when they have limited liability.  Risk-neutral managers may not when acting as agents under contract and taking costly actions to acquire informatin before taking decisions.  Limited liability makes it optimal to increase the reward for...

We reconsider the job design theory of Holmstrom and Milgrom (1991), to include career concerns considerations. When reputations are considered, discretion may play a more integral part of the incentive scheme. It can be a useful instrument to enhance incentives and prevent the adverse selection...

This paper discusses the incentive to bundle when consumer valuations are non-additive and/or when products are supplied by separate sellers.  Whether integrated or separate, a firm has an incentive to introduce a bundle discount when demand for the bundle is more elastic than the overall...

In recent years bonuses tied to performance have become commonplace in banks and other financial institutions; indeed they now constitute a major part of employee compensation.  The practice was originally justified by academic work on principal-agent contracts, which argued that performance...

Alpha is the amount by which the returns from a given asset exceed the returns from the wider market.  The standard way of estimating alpha is to correct for correlation with the market by regressing the asset's returns against the market returns over an extended period of time and then apply...

Traditional methods for analyzing portfolio returns often rely on multifactor risk assessment, and tests of significance are typically based on variants of the t-test.  This approach has serious limitations when analyzing the returns from dynamically traded portfolios that include derivative...

The World's nations have yet to reach a truly effective treaty to control the emission of greenhouse gases.  The importance of compatibility with private incentives of individual countries has been acknowledged (at least by game theorists) in designing climate policies for the post-Kyoto...

In many rural settings, informal mutual support networks have evolved into semiformal insurance groups, such as funeral societies.  Using detailed panel data for six villages in Ethiopia, we can distinguish two types of contracts, in terms of whether payments are only made at the time of death...

This paper models the implications of endogenous group formation for efficient risk-sharing contracts in the dynamic limited commitment model.  Endogenising group formation requires that any risk-sharing arrangement is not only stable with respect to individual deviations but also with respect...

This chapter reviews the literature on the theory of relational incentive contracts.  It motivates the discussion by the classic applications of relational contracts to the GM-Fisher Body relationship and the relationships between Japanese automobile manufacturers and their subcontractors.  It...