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Testing Canonical Tournament Theory: On the Impact of Risk, Social Preferences and Utility Structure

Sheremeta, Roman M.; Wu, Steven Y. - Institute for the Study of Labor (IZA) - 2012

We use experiments to test comparative statics predictions of canonical tournament theory. Both the roles of principal and agent are populated by human subjects, allowing us to test predictions for both incentive responses and optimal tournament design. Consistent with theory, we observed an...

Persistent link: https://www.econbiz.de/10009646321

Contracts between Legal Persons

Kornhauser, Lewis A.; MacLeod, W. Bentley - Institute for the Study of Labor (IZA) - 2010

Contract law and the economics of contract have, for the most part, developed independently of each other. In this essay, we briefly review the notion of a contract from the perspective of lawyer, and then use this framework to organize the economics literature on contract. The title, Contracts...

Persistent link: https://www.econbiz.de/10008765228

Optimal Incentive Contracts under Inequity Aversion

Englmaier, Florian; Wambach, Achim - Institute for the Study of Labor (IZA) - 2005

We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a...

Persistent link: https://www.econbiz.de/10005566722

The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition

Dulleck, Uwe; Kerschbamer, Rudolf; Sutter, Matthias - Institute for the Study of Labor (IZA) - 2009

determinants for efficiency in credence goods markets. While theory predicts that either liability or verifiability yields … efficiency, we find that liability has a crucial, but verifiability only a minor effect. Allowing sellers to build up reputation … higher efficiency as long as liability is violated. …

Persistent link: https://www.econbiz.de/10005822832

Do Foreign Owners Favor Short-Term Profit? Evidence from Germany

Dill, Verena; Jirjahn, Uwe; Smith, Stephen C. - Institute for the Study of Labor (IZA) - 2014

Comparing domestic- and foreign-owned firms in Germany, this paper finds that foreign-owned firms are more likely to focus on short-term profit. This influence is particularly strong if the local managers of the German subsidiary are not sent from the foreign parent company. Moreover, the...

Persistent link: https://www.econbiz.de/10010884296

Wage-Hours Contracts, Overtime Working and Premium Pay

Hart, Robert A.; Ma, Yue - Institute for the Study of Labor (IZA) - 2008

This paper offers a contract-based theory to explain the determination of standard hours, overtime hours and overtime premium pay. We expand on the wage contract literature that emphasises the role of firm-specific human capital and that explores problems of contract efficiency in the face of...

Persistent link: https://www.econbiz.de/10005233734

Performance Pay, Sorting, and Outsourcing

Sousa-Poza, Alfonso; Henneberger, Fred; Ziegler, Alexandre - Institute for the Study of Labor (IZA) - 2007

Implementing performance pay requires that workers' output be measured. When measurement costs differ among firms, those with a measurement cost advantage choose to implement performance pay. They attract the best workers, and both the level and variability of compensation are higher at these...

Persistent link: https://www.econbiz.de/10005703403

How Often Should You Open the Door? Optimal Monitoring to Screen Heterogeneous Agents

Ichino, Andrea; Muehlheusser, Gerd - Institute for the Study of Labor (IZA) - 2004

This paper shows that monitoring too much a partner in the initial phase of a relationship may not be optimal if the goal is to determine his loyalty to the match and if the cost of ending the relationship increases over time. The intuition is simple: by monitoring too much we learn less on how...

Persistent link: https://www.econbiz.de/10005703754

Competition, Cooperation, and Corporate Culture

Kosfeld, Michael; Siemens, Ferdinand von - Institute for the Study of Labor (IZA) - 2007

Teamwork and cooperation between workers can be of substantial value to a firm, yet the level of worker cooperation often varies between individual firms. We show that these differences can be the result of labor market competition if workers have heterogeneous preferences and preferences are...

Persistent link: https://www.econbiz.de/10005703792

Black Sheep and Walls of Silence

Muehlheusser, Gerd; Roider, Andreas - Institute for the Study of Labor (IZA) - 2004

In this paper we analyze the frequently observed phenomenon that (i) some members of a team ("black sheep") exhibit behavior disliked by other (honest) team members, who (ii) nevertheless refrain from reporting such misbehavior to the authorities (they set up a "wall of silence"). Much cited...

Persistent link: https://www.econbiz.de/10005822967