In the basic adverse selection model, a seller makes a contract offer to a privately informed buyer. A fundamental hypothesis of incentive theory is that the seller may want to offer a menu of contracts to separate the buyer types. In the good state of nature, total surplus is not different from...

By incorporating reciprocity in an otherwise standard principal–agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some, but not all, workers care more for their principal when they are convinced that...

A growing literature analyzes revenue-maximizing contracts for situations in which agents can acquire private information before they decide whether to join the contract. It is conjectured that the results also apply to the more natural scenario where information can be acquired either before or...

This paper provides a new explanation for the dominance of the low-powered incentive contract over the high-powered incentive contract using a hybrid model of moral hazard and adverse selection. We first show that unobservable risk aversion or cost leads to low-powered incentives. We then...

In this paper, I study the effects of overconfidence on incentive contracts in a moral-hazard framework. Agent overconfidence can have conflicting effects on the equilibrium contract. On the one hand, an optimistic or overconfident agent disproportionately values success-contingent payments, and...

In a principal–agent model with moral hazard, a signal about the principalʼs technology — the stochastic mapping from the agentʼs action to the outcome — is observed before the contract is offered. The signal is either uninformative (null information), informative and observed only by...

This paper studies optimal auction design in a private value setting with endogenous information gathering. We develop a general framework for modeling information acquisition when a seller wants to sell an object to one of several potential buyers, who can each gather information about their...

We study all-pay auctions with multiple prizes. The players have the same value for all the certain prizes except for one uncertain prize for which each player has a private value. We characterize the equilibrium strategy and show that, independent of the ranking of the uncertain prize, if the...

We examine a model of limited communication in which the seller is selling a single good to two potential buyers. In each of the finite number of periods the seller asks one of the two buyers a binary question. After the final answer, the allocation and the transfers are executed. The model...

Prosper, today the second largest social lending marketplace with nearly 1.5 million members and $380 million in funded loans, employed an auction mechanism amongst lenders to finance each borrower's loan until 2010. Given that a basic premise of social lending is cheap loans for borrowers, how...