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Authority and incentives in organizations

Kräkel, Matthias - 2013

The paper analyzes the choice of organizational structure as solution to the trade-off between controlling behavior based on authority rights and minimizing costs for implementing high efforts. The analysis includes the owner of a firm, a top manager and two division heads. If it is more...

Persistent link: https://www.econbiz.de/10010198507

Optimal procurement contracts with pre-project planning

Krähmer, Daniel; Strausz, Roland - 2010

The paper studies procurement contracts with pre-project investigations in the presence of adverse selection and moral … related to false negatives. The optimal mechanism is a menu of option contracts that achieves the dual goal of providing …

Persistent link: https://www.econbiz.de/10003935679

Business groups in emerging markets : financial control and sequential investment

Hainz, Christa - 2006

substitute some functions of missing institutions, for example, enforcing contracts. We investigate this by setting up a model …

Persistent link: https://www.econbiz.de/10010365879

Fairness and contract design

Fehr, Ernst; Klein, Alexander; Schmidt, Klaus M. - 2005 - This version: November 5, 2005

We show experimentally that fairness concerns may have a decisive impact on the actual and optimal choice of contracts … in a moral hazard context. Bonus contracts that offer a voluntary and unenforceable bonus for satisfactory performance … provide powerful incentives and are superior to explicit incentive contracts when there are some fair-minded players. But …

Persistent link: https://www.econbiz.de/10010371080

Subjective evaluation versus public information

Bester, Helmut; Münster, Johannes - 2013

This paper studies a principal-agent relation in which the principal's private information about the agent's effort choice is more accurate than a noisy public performance measure. For some contingencies the optimal contract has to specify ex post inefficiencies in the form of inefficient...

Persistent link: https://www.econbiz.de/10009781395

Credence goods, costly diagnosis, and subjective evaluation

Bester, Helmut; Dahm, Matthias - 2014

We study contracting between a consumer and an expert. The expert can invest in diagnosis to obtain a noisy signal about whether a low-cost service is sufficient or whether a high-cost treatment is required to solve the consumer's problem. This involves moral hazard because diagnosis effort and...

Persistent link: https://www.econbiz.de/10010436207

Tournaments with gaps

Imhof, Lorens; Kräkel, Matthias - 2013

A standard tournament contract specifies only tournament prizes. If agents' performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive the...

Persistent link: https://www.econbiz.de/10010198511

Merger efficiency and managerial incentives

Kräkel, Matthias; Müller, Daniel - 2013

We consider a two-stage principal-agent model with limited liability in which a CEO is employed as agent to gather information about suitable merger targets and to manage the merged corporation in case of an acquisition. Our results show that the CEO systematically recommends targets with low...

Persistent link: https://www.econbiz.de/10010198514

Objective versus subjective performance evaluations

Terstiege, Stefan - 2013

Why does incentive pay often depend on subjective rather than objective performance evaluations? After all, subjective evaluations entail a credibility issue. While the most plausible explanation for this practice is lack of adequate objective measures, I argue that subjective evaluations might...

Persistent link: https://www.econbiz.de/10010198959

Market transparency, adverse selection, and moral hazard

Klein, Tobias J.; Lambertz, Christian; Stahl, Konrad - 2013

We study the effects of improvements in market transparency on eBay on seller exit and continuing sellers’ behavior. An improvement in market transparency by reducing strategic bias in buyer ratings led to a significant increase in buyer valuation especially of sellers rated poorly prior to...

Persistent link: https://www.econbiz.de/10010198977