A main prediction of agency theory is the well known risk-incentive trade-off. Incentive contracts should be found in environments with little uncertainty and for agents with low degrees of risk aversion. There is an ongoing debate in the literature about the first trade-off. Due to lack of...

Incentive theory predicts that contract terms should respond to differences in agents' productivities. Firms' practice of anonymous contracts thus appears puzzling. We show that such a quot;one-size-fits-allquot; approach can be reconciled with standard agency theory if careers are marked by...

Incentives often fail in inducing economic agents to engage in a desirable activity; implementability is restricted. What restricts implementability? When does re-organization help to overcome this restriction? This paper shows that any restriction of implementability is caused by an...

When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...

We quantify and study state-level economic policy uncertainty. Tapping digital archives for nearly 3,500 local newspapers, we construct three monthly indexes for each state: one that captures state and local sources of policy uncertainty (ΕPU-S), one that captures national and international...

We study the role of risk aversion underlying son preference in patriarchal societies, where sons serve as better insurance for old-age support than daughters. The implications of an insurance motive on son preference are two-fold. First, prior to the birth of their children, more risk-averse...

Single-sex classes within coeducational environments are likely to modify students' risk-taking attitudes in economically important ways. To test this, we designed a controlled experiment using first year college students who made choices over real-stakes lotteries at two distinct dates....

Previous research shows that firms shroud high add-on prices in competitive markets with naive consumers leading to inefficiency. We analyze the effects of regulatory intervention via educating naive consumers on equilibrium prices and welfare. Our model allows firms to shroud, unshroud, or...

In this paper we utilise data from a unique new birth‐cohort study to see how the risk preferences of young people are affected by cognitive skills and gender. We find that cognitive ability (measured by the percentile ranking for university entrance at age 18) has no effect on risk...

Although both economists and psychologists seek to identify determinants of heterogeneity in behavior, they use different concepts to capture them. In this review we first analyze the extent to which economic preferences and psychological concepts of personality – such as the Big Five and...