Risk-neutral individuals take more risky decisions when they have limited liability.  Risk-neutral managers may not when acting as agents under contract and taking costly actions to acquire informatin before taking decisions.  Limited liability makes it optimal to increase the reward for...

This chapter reviews the literature on the theory of relational incentive contracts.  It motivates the discussion by the classic applications of relational contracts to the GM-Fisher Body relationship and the relationships between Japanese automobile manufacturers and their subcontractors.  It...

This paper models the implications of endogenous group formation for efficient risk-sharing contracts in the dynamic limited commitment model.  Endogenising group formation requires that any risk-sharing arrangement is not only stable with respect to individual deviations but also with respect...

We consider an observer who makes a finite number of observations of an industry producing a homogeneous good, where each observation consists of the market price and firm specific production quantities.  We develop a revealed preference test (in the form of a linear program) for the hypothesis...

The World's nations have yet to reach a truly effective treaty to control the emission of greenhouse gases.  The importance of compatibility with private incentives of individual countries has been acknowledged (at least by game theorists) in designing climate policies for the post-Kyoto...

Alpha is the amount by which the returns from a given asset exceed the returns from the wider market.  The standard way of estimating alpha is to correct for correlation with the market by regressing the asset's returns against the market returns over an extended period of time and then apply...

Traditional methods for analyzing portfolio returns often rely on multifactor risk assessment, and tests of significance are typically based on variants of the t-test.  This approach has serious limitations when analyzing the returns from dynamically traded portfolios that include derivative...

This paper investigates relational incentive contracts with a continuum of privately observedagent types that are persistent over time. For a sufficiently productive relationship,a pooling contract exists in which all agent types continuing the relationshipchoose the same action. Necessary and...

This paper discusses the incentive to bundle when consumer valuations are non-additive and/or when products are supplied by separate sellers.  Whether integrated or separate, a firm has an incentive to introduce a bundle discount when demand for the bundle is more elastic than the overall...

In recent years bonuses tied to performance have become commonplace in banks and other financial institutions; indeed they now constitute a major part of employee compensation.  The practice was originally justified by academic work on principal-agent contracts, which argued that performance...