In this paper, the authors evaluate certain challenges put forth by Mukesh Eswaran and Ashok Kotwal (1984) and Eric Rasmusen (1987) concerning the legitimacy of Bengt Holmstrom's (1982) proposed solution for the problem of moral hazard in teams. They demonstrate that the argument put forth by...

The authors provide an explanation for firms smoothing wages over the business cycle that is based on asymmetric information about the quality of a firm's management team and does not depend upon the workers being risk averse. When firms pay their workers the full information profit maximizing...

A classic result in the theory of labor contracts with asymmetric information is that underemployment results if and only if leisure is an inferior good. A classic result in models where unemployment occurs because of indivisibilities, including implicit contract models and some equilibrium...