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...

In recent decades, many firms offered more discretion to their employees, often increasing the productivity of effort but also leaving more opportunities for shirking. These “high-performance work systems” are difficult to understand in terms of standard moral hazard models. We show...

Reputation systems aim to induce honest behavior in online trade by providing information about past conduct of users. Online reputation, however, is not directly connected to a person, but only to the virtual identity of that person. Users can therefore shed a negative reputation by creating a...

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...

This paper derives conditions under which reputation enables certifiers to resist capture. These conditions alone have strong implications for the industrial organization of certification markets: 1) Honest certification requires high prices that may even exceed the static monopoly price. 2)...

At least two: the reputation of their brand and a reputation for being tough on imitators of this brand. Sustaining a brand requires both investment in its reputation amongst consumers and the defence of the brand against followers that infringe upon it. I study the defence of trade marks...