Partnerships are the prevalent organizational form in many industries. Profits are most frequently shared equally among the partners. The purpose of our paper is to provide a rationale for equal sharing rules. We show that with inequity-averse partners the equal sharing rule is the unique...

This article considers the consequence of incomplete contracts that arise due to difficulties in precisely describing potentially relevant contingencies. Unlike much of the literature, this article concludes that the resulting incompleteness could often be immaterial with respect to economic...

We consider a dismissal tournament where the loser gets fired. Although the firm takes possible selection failures into account when choosing the optimal tournament design, the selection efficiency of a dismissal tournament is often rather low. This is because low-ability workers, possessing...

A fundamental principle of economics is that specialization and the division of labor increase the productivity of workers by allowing them to concentrate on narrowly defined tasks. However, not all firms appear to promote a high degree of specialization, but instead rotate workers among several...

The empirical core of this essay is a set of estimates of the aggregate transaction costs for sixteen European nations. I explore a number of hypothesized determinants of these costs, but only an economic systems variable, defined in terms of the institutional structure of the country, passes a...

This paper develops a two-sector general-equilibrium model in which firms in the primary economy have to create workplaces prior to production and product-market competition. For this, we introduce the endogenous sunk-cost approach with two-stage decisions of firms from IO in the macro labor...

Reductions in the division of labour are a significant feature of modern developments in work organisation. It has been recognised that a reduced division of labour can have the advantages of job enrichment and lower coordination costs. In this paper it is shown how advantages from a lesser...

Recent empirical research has established what many assumed - few people read form contracts. This research employs an online experimental design to fill gaps in the literature by asking two important questions: (1) To what extent does information about the exchange beyond the contract...

This paper reports further experimental results on exclusive dealing contracts. We extend Landeo and Spier's (2009) work by studying Naked Exclusion in a strategic environment that involves a four-player, two-stage game. In addition to the roles of seller and buyers, our experimental environment...

This paper considers the role of equity transfer to strategic alliance partners in mitigating the moral-hazard problem that occurs if a participating firm faces some possibility of reallocating a part of the resources devoted to the joint project of the strategic alliance or retreating from the...