Contrary to previous literature we hypothesize that labor's interest may well – like that of shareholders – aim at securing the long-run survival of the firm. Consequently, employee representatives on the supervisory board could well have an interest in increasing incentive-based...

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,...

The paper presents a model of educational production which tries to make sense of recent evidence on effects of institutional arrangements on student performance. In a simple principal-agent framework, students choose their learning effort to maximize their net benefits, while the government...

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...

An investor's choice between safe and risky assets has long been seen as a behavior toward risk: more risk-averse investors buy more of the safe asset. Applying this intuition to incentive pay contracts, we develop a model and an experiment that show, in a very general setting, that the choice...

Rank-order tournaments are usually modeled simultaneously. However, real tournaments are often sequentially. We show that agents' strategic behavior significantly differs in sequential tournaments compared to simultaneous tournaments. In a sequential tournament, under certain conditions the...

We study the incentive effects of grating supervisors access to objective performance information when agents work on multiple tasks. We first analyze a formal model showing that incentives are lower powered when supervisors have no access to objective measures but assess performance...

A previous literature cautions that paying workers for performance might crowd out non-monetary motives to work hard. Empirical evidence from the field, however, has been based on between-subjects designs that are best suited for detecting crowding out due to low-powered incentives. High-powered...