Tournament incentive schemes offer payments dependent on relative performance and are intended thereby to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to degrade the production of his competitors in order to improve the own relative position....

We study the mechanics of leading by example in teams. Leadership is beneficial for the entire team when agents are conformists, i.e., dislike effort differentials. We also show how leadership can arise endogenously and discuss what type of leader benefits a team most.

We experimentally analyze whether being exposed to different incentive schemes induces subjects to change their behavior. In particular, we investigate the effect on trust and trustworthiness measured by conducting an investment game. We implement two simple incentive schemes modeling the basic...

We study strategic communication between a principal and an agent when both have private information that collectively determines the principal's optimal decision. The principal's possession of decision-relevant information makes the agent uncertain how her report influences the principal's...

We explore the implications of altruism in family firms for the allocation of decision-making rights. Our results suggest that centralization occurs in a broader range of circumstances in family than in nonfamily firms, consistent with empirical evidence. We show that an agent might remain in a...

We demonstrate that a multi-period model, and the valuations it implies, is essential for understanding inefficiency in cooperative organizational forms. Investment is efficient given the supply of input, but economic inefficiency arises because of over-supply of input induced by suppliers...

This paper develops a general equilibrium model endogenizing labor specialization, firm size, firm specialization, interfirm trade, and economic fragmentation. In contrast to the standard neoinstitutionalist understanding of firms and markets as substitutes in organizing production, firms and...

Corporate actors differ from individuals in that it may be possible to observe the formation of the corporate will from outside, and to influence its formation. This feature can be exploited by regulators. One technique is inducing corporate actors to hire an interface actor, representing the...

This paper presents one reason for adopting diverse work assignments, rooted in a desire to match employees' pay with the skills they have cultivated on the job. When on-the-job learning parlays into attractive external opportunities, employees may threaten to seek a different and higher paying...

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...