This paper presents a united framework for understanding the determinants of both CEOincentives and total pay levels in competitive market equilibrium. It embeds a modified principal-agent problem into a talent assignment model to endogenize both elements of compensation. The model s closed form...

Bebchuk and Fried (2004) argue that executive compensation is set by CEOs themselves rather than boards on behalf of shareholders, since many features of observed pay packages may appear inconsistent with standard optimal contracting theories. However, it may be that simple models do not capture...

This paper identifies a broad class of situations in which the contract is both attainable in closed form and detail-neutral. The contract's functional form is independent of the noise distribution and reservation utility; moreover, when the cost of effort is pecuniary, the contract is linear in...