When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...

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...

In many markets, sellers advertise their good with an asking price. This is a price at which the seller is willing to take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the...

We consider an economy where individuals privately choose effort and trade competitively priced securities that pay off with effort-determined probability. We show that if insurance against a negative shock is sufficiently incomplete, then standard functional form restrictions ensure that...

This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation...

We focus on the role that the transmission of information between a multilateral (the IMF) and a country has for the optimal design of conditional reforms. Our model predicts that when agency problems are especially severe, and/or IMF information is valuable, a centralized control is indeed...

We analyze the costs and benefits of using social image to foster virtuous behavior. A Principal seeks to motivate reputation-conscious agents to supply a public good. Each agent chooses how much to contribute based on his own mix of public-spiritedness, private signal about the value of the...

A standard hidden information model is considered to study the influence of the a priori productivity distribution on the optimal contract. A priori more productive (hazard rate dominant) agents work less, enjoy lower rents, but generate a higher expected surplus.

We study experimentally the effect of bargaining power in two sequential mechanisms that offer the possibility to trade at a fixed price before an auction. In the "Buy-It-Now" format, the seller has the bargaining power and offers a price prior to the auction; whereas in the "Sell-It-Now"...

This paper offers a rationale for limiting the delegation of (real) authority, which neither relies on insurance arguments nor depends on ownership structure. We analyse a repeated hidden action model in which the actions of a risk neutral agent determine his future outside option. Consequently,...