We analyze a model in which agents exert effort to create innovations within an organization. When payments are infeasible, the decision on the implementation of a proposal is shown to be made by simple monotonic decision rules. Then we look for optimal rules in several contexts. A trade-off...

We analyze in an incomplete contracts model whether a supplier should be integrated if in addition to his investment level he chooses the intensity of specialization towards the buyer's needs. A basic trade-off arises: While non-integration leads to higher investment incentives, potential...

If a manager stays in office for a long time he will have learned much about his subordinates. Thus competition among them will be weakened as the manager has made up his mind who is suited best for which position. With a new manager the ``rat race'' for favorable tasks is restarted leading...

We examine the question whether a decision should be delegated to a subordinate and whether this is done efficiently. We illustrate that delegation is useful for several reasons. First, it serves to test agents with unknown ability. Then, it may improve their motivation when carrying out...

The impact of wage increases on job satisfaction is explored. First, it is empirically confirmed that current job satisfaction rises with the absolute wage level as well as with wage increases. Second, a basic job satisfaction function is constructed based on the empirical results, and...

It is often claimed that (i) managers work too hard on operational issues and do not spend enough effort on strategic activities and (ii) something can be done about this by introducing nonfinancial performance measures as for instance with a balanced scorecard. We give an explanation for both...

In an asymmetric tournament model with endogenous risk choice by the agents it is shown that equilibrium efforts decrease (increase) with risk if abilities are sufficiently similar (different). Risk also affects winning probabilities. The interaction of both effects is analyzed.

By enriching a principal-agent model it is shown that the introduction of monetary incentives may reduce an agent's motivation. In a first step, we allow for the possibility that some agents stick to unverifiable agreements. The larger the fraction of reliable agents, the lower powered will then...

In this paper, we combine the strategic delegation approach of Fershtman-Judd-Sklivas with contets. The results show that besides a symmetric equilibrium there also exist asymmetric equilibria in which one owner induces pure sales maximization to his manager so that all the other firms drop out...

We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that if the agent faces limited liability and there is an incentive problem the principal prefers not to impose such a clause if and only if the...