This paper considers procurement auctions with costly bidding when the auctioneer is unable to commit himself to restrict the number of bidders. The auctioneer can, however, offer a financial reward to be paid to every short-listed bidders as an indirect commitment device. Rewards for...

A principal uses security bid auctions to award an incentive contract to one among several agents, in the presence of hidden action and hidden information. Securities range from cash to equity and call options. “Steeper†securities are better surplus extractors that narrow the gap...

If bidders are uncertain whether the auctioneer sticks to the announced reserve, some bidders respond by not bidding, speculating that the auctioneer may revoke the reserve. However, the reserve inadvertently signals the auctioneer's type, which drives a unique separating and a multitude of...

Several empirical findings have challenged the traditional view on the trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle on the positive relationship between risk and incentives can be explained....

Individuals who compete in a contest-like situation (for example, in sports, in promotion tournaments, or in an appointment contest) may have an incentive to illegally utilize resources in order to improve their relative positions. We analyze such doping within a tournament game between two...

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...

Several empirical studies have challenged tournament theory by pointing out that (1) there is considerable pay variation within hierarchy levels, (2) promotion premiums only in part explain hierarchical wage differences and (3) external recruitment is observable on nearly any hierarchy level. We...

Several empirical findings have challenged the traditional trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle on the positive relationship between risk and incentives can be explained.

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004The existing literature on the comparison of tournaments and piece rates as alternative incentive schemes has focused on the case of unlimited liability. However, in practice real workers’ wealth is typically...

This paper shows that, contrary to what is generally believed, decreasing concavity of the agent’s utility function with respect to the screening variable is not sufficient to ensure that stochastic mechanisms are suboptimal. The paper demonstrates, however, that they are suboptimal...