This paper examines a principal’s trade-off when he decides whether to transfer knowledge to other members of the organization. Although knowledge makes an agent more productive (productivity effect), knowledge transfer could cause the agent to become selfemployed. The agent would then become...

This paper discusses the optimal firm size in the presence of influence activities, and the level of individual rent-seeking dependent on the economic situation of the firm. Since firm size has a discouraging effect on the level of individual rent-seeking but also a quantity effect as the number...

According to New Institutional Economics, two or more individuals will found an organization, if it leads to a benefit compared to market allocation. A natural consequence will then be internal rent seeking. We discuss the interrelation between profits, rent seeking and the foundation of...

Agency theory emphasizes that separating ownership and control can lead to inefficiencies in corporations, but the literature on strategic delegation points out that the owner will profit from this separation due to advantages from self-commitment. In this paper, both literatures are combined....

We analyze the optimal choice of risk in a two-stage tournament game between two players that have different concave utility functions. At the first stage, both players simultaneously choose risk. At the second stage, both observe overall risk and simultaneously decide on effort or investment....

This paper extends the discussion of simultaneous-move tournaments by focusing on the analysis of heterogeneous instead of homogeneous contestants. We show that the principal will not implement first-best efforts even though the agents are risk neutral and not limited in wealth, and despite the...

We analyze the optimal design of rank-order tournaments with heterogeneous workers. Iftournament prizes do not differ between the workers(uniform prizes), as in the previous tournament literature, the outcome will be ineffcient. In the case of limited liability, the employer may benefit from...