Abstract We study optimal incentive provision for “knowledge workers�, a crucial resource for many organizations. We augment a standard moral-hazard framework to reflect two key patterns: First, retention is a challenge because workers are free to leave; thereby harming their...

We study optimal incentive provision for "knowledge workers", a crucial resource for many organizations. We augment a standard moral-hazard framework to reflect two key patterns: First, retention is a challenge because workers are free to leave; thereby harming their employer. Second, the value...

Abstract There is ample empirical evidence indicating that a substantial fraction of the population exhibits social preferences. Recent work also shows that social preferences influence the effectiveness of incentives in labor relations. Hence, when making contracting decisions, employers should...

This paper analyzes a model in which owners of competing firms can hire biased managers for strategic reasons. We show that independent of the mode of competition, that is, price or quantities, owners hire aggressive managers. This result contrasts with the classic literature on strategic...

This paper shows that it is profitable for a firm to hire an overoptimistic manager to commit to a certain investment strategy in an R&D tournament situation. In the unique symmetric equilibrium, all firms delegate to overoptimistic managers, where the optimal degree of overoptimism depends on...

We solve for the optimal contract when agents are reciprocal, demonstrating that generous compensation can substitute for performance-based pay. Our results suggest several factors that make firms more likely to use reciprocal incentives. Reciprocity is most powerful when output is a poor signal...

This paper analyzes a model in which owners of competing firms can hire biased managers for strategic reasons. We show that independent of the mode of competition, that is, price or quantities, owners hire aggressive managers. This result contrasts with the classic literature on strategic...

We address the question how much authority a principal should delegate to a manager with conflicting interests and uncertain ability in a context in which the manager has both compensation-based and reputational incentives. The optimal level of authority balances the value of the manager's...

Multi-unit auctions are sometimes plagued by the so-called exposure problem. In this paper, we analyze a simple game called the "chopstick auction" in which bidders are confronted with the exposure problem. We do so both in theory and in a laboratory experiment. In theory, the chopstick auction...