In this paper we solve a parametric moral hazard model that incorporates risk and inequity aversion. In the model, the worker's effort is not contractible but the employer can link the worker's compensation to the revenue, a measure probabilistically related to the effort. The model can account...

We compare behavior in a one-shot Centipede game across several payoff structures including nonlinear payoff tournaments. Assuming Nash to be optimal, results suggest nonlinear tournament payoffs based on overall relative rewards are not sufficient to increase Nash results in the one-shot...

By adjusting the strength of IPRs protection, the government can change the extent of knowledge spillovers in R&D. A large spillover rate helps to improve the productivity of the less efficient firms and save on the overall production costs. But, at the same time, it reduces the innovator's...

Using county-level census data from 19th century Prussia, this paper argues that the introduction of the power loom, a key technological innovation in the Industrial Revolution, had a significant impact on labour market outcomes and composition 40 years later. To combat endogeneity, I use a...

Complexity aversion describes the preference of decision makers for less complex options that cannot be explained by expected utility theory. While a number of research articles investigate the effects of complexity on choices, up to this point there exist only theoretical approaches aiming to...

We extend the framework of Dubey and Geanakoplos (2002) to the case of moral hazard. We analyze the equilibrium properties of the model and we show that equal ex-ante consumers may choose to promise differently, and, as a consequence, choose different actions. This illustrates how the pool of...

Career concerns can mitigate moral hazard problems, but these diminish as the agent's retirement age approaches. Addressing this problem, this note draws attention to the role of the interaction between contractible and non-contractible signals.

How might central bank communication of its internal forecasts assist the conduct of monetary policy? The literature has shown that heterogeneous expectations may have destabilizing effects on aggregate dynamics. This paper analyzes through adaptive learning the policy implications of central...

This note analyzes the effect of a change in the covariance between labor income risk and interest rate risk on the threshold level for prudence ensuring positive precautionary saving, recently derived by Baiardi, Magnani and Menegatti (2014). We show that this effect is different in different...

This paper examines a pre-firm environment where agents who are potentially to become employees of a firm exert influence over one another. I argue that the manner in which they do so and the level of information an entrepreneur has on the agents' influence affects what is the most and least...