Employment contracts give a principal the authority to decide flexibly which task his agent should execute. However, there is a tradeoff, first pointed out by Simon (1951), between flexibility and employer moral hazard. An employment contract allows the principal to adjust the task quickly to...

We develop a theory of leadership that focuses on the role managersplay in motivating employees through their attitude towards employees. We modela manager's attitude as her perception about employees' abilities of successfullycompleting challenging tasks. We show that a positive attitude...

We build a theory of prosocial behaviour that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. The presence of rewards or punishments creates doubt as to the true motive for which good deeds are performed, and this ‘overjustification...

We analyze a long-term contracting problem involving common uncertainty about a parameter capturing the productivity of the relationship, and featuring a hidden action for the agent. We develop an approach that works for any utility function when the parameter and noise are normally distributed...

We study the effects of unequal representation in the interest-group system on the degree of information transmission between a lobbyist and a policy-maker. Employing a dynamic cheap-talk model in which the lobbyist cares instrumentally about his reputation for truth telling, we show that the...

Economic growth occurs as resources are reallocated from the traditional sector to the more productive modern sector. Yet, the latter is more vulnerable to political predation. Hence, political risk hinders development. We analyse a politico-economic game between citizens and governments, whose...

This paper analyzes how private decisions and public policies are shaped by personal and societal preferences (values), material or other explicit incentives (laws) and social sanctions or rewards (norms). It first examines how honor, stigma and social norms arise from individuals’ behaviors...