We analyze a task-assignment model in which a principal assigns a task to one of two agents depending on future states. If the agents have concave utility, the principal assigns the task to them contingent on the state. We show that if the agents are loss averse, a state-independent...

In a principal–agent model, we find that firms may not always benefit from the relative concerns of agents if such concerns are heterogeneous. Further, accounting for the influence of the environment on such concerns, profits are reduced relative to the no-comparisons benchmark.

I study the trade-off between private and verifiable interim performance evaluations under uncertainty. More uncertainty leads to higher agency costs if the interim evaluation is public and verifiable but lower agency costs if the interim evaluation is private and unverifiable.

We consider an adverse selection model in which the agent can gather private information before the principal offers the contract. In scenario I, information gathering is a hidden action, while in scenario II, it is observable. We study how the two scenarios differ. Specifically, the principal...

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...

The government wants two tasks to be performed. In each task, unobservable effort can be exerted by a wealth-constrained private contractor. If the government faces no binding budget constraints, it is optimal to bundle the tasks. The contractor in charge of both tasks then gets a bonus payment...

In the property rights approach to the theory of the firm (Hart, 1995), parties bargain about whether or not to collaborate after non-contractible investments have been made. Most contributions apply the regular Nash bargaining solution. We explore the implications of using the generalized Nash...

We reconsider the property rights approach to the theory of the firm based on incomplete contracts. We explore the implications of different degrees of relationship-specificity when there are two parties, A and B, who can make investments in physical capital (instead of human capital). If...

This paper provides a necessary and sufficient condition for the existence of nonautarkic contract in a risk sharing model with two-sided lack of commitment. Verifying the condition takes just one Gaussian elimination of a matrix.

There is extensive theoretical research focusing on the ways in which principal–agent interactions vary depending on the agent’s expertise or knowledge. While the empirical research testing the implications of these models involves a broad array of experts ranging from lawyers to physicians...