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Past and Future Developments in the Economics of Relational Contracts

Fahn, Matthias; MacLeod, W. Bentley; Muehlheusser, Gerd - 2023

This paper was written as an editorial preface to a "Symposium on Relational Contracts", that was jointly edited by the three authors, and that will appear in the Journal of Institutional and Theoretical Economics (JITE). The Symposium contains eleven contributions to the economics of relational...

Persistent link: https://www.econbiz.de/10014377330

Non-Common Priors, Incentives, and Promotions: The Role of Learning

Fahn, Matthias; Klein, Nicolas - 2023

We analyze a repeated principal-agent setting in which the principal cares about the agent's verifiable effort as well as an extra profit that can be generated only if the agent is talented. The agent is overconfident about his talent and updates beliefs using Bayes' rule. An exploitation...

Persistent link: https://www.econbiz.de/10014377455

The Commitment Role of Equity Financing

Fahn, Matthias; Merlo, Valeria; Wamser, Georg - 2014

Existing theories of a firm's optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for...

Persistent link: https://www.econbiz.de/10010398643

Minimum Wages and Relational Contracts

Fahn, Matthias - 2014

The need to give incentives is usually absent in the literature on minimum wages. However, especially in the service sector it is important how well a job is done, and employees must be incentivized to perform accordingly. Furthermore, many aspects regarding service quality cannot be verified,...

Persistent link: https://www.econbiz.de/10010427676

How Blackwater Takes Uncle Sam for a Ride - and Why He Likes It. A Model of Moral Hazard and Limited Commitment

Fahn, Matthias; Hadjer, Tahmina Sadat - 2014

Private Military and Security Companies (PMSCs) have been gaining increasing media and scholarly attention particularly due to their indispensable role in the wars in Afghanistan 2001 and Iraq 2003. Nevertheless, theoretical insights into the agency problems inherent when hiring PMSCs and how to...

Persistent link: https://www.econbiz.de/10010427678

Household Relational Contracts for Marriage, Fertility and Divorce

Fahn, Matthias; Rees, Ray - 2014

, how many children to have and subsequently whether to stay together or separate. We make precise the idea that cooperation … maximising, decisions. Side-payments are used to support cooperation but are not legally enforceable and thus have to be part of … an equilibrium. This requires a stable relationship and credible punishment threats. Within this framework, we analyze …

Persistent link: https://www.econbiz.de/10010427685

Size Matters - "Over"investments in a Relational Contracting Setting

Englmaier, Florian; Fahn, Matthias - 2015

The corporate finance literature documents that managers tend to overinvest into physical assets. A number of theoretical contributions have aimed to explain this stylized fact, most of them focussing on a fundamental agency problem between shareholders and managers. The present paper shows that...

Persistent link: https://www.econbiz.de/10010480868

Size matters: "Over"investments in a relational contracting setting

Englmaier, Florian; Fahn, Matthias - 2015

Persistent link: https://www.econbiz.de/10011350835

Reciprocity in dynamic employment relationships

Fahn, Matthias - 2019

This paper explores how a relational contract establishes a norm of reciprocity and how such a norm shapes the provision of informal incentives. Developing a model of a long-term employment relationship, I show that generous upfront wages that activate the norm of reciprocity are more important...

Persistent link: https://www.econbiz.de/10012018325

Gift exchange vs. repeated interaction as a source of reciprocal behavior

Fahn, Matthias; Schade, Anne; Schüßler, Katharina - 2017

Humans reciprocate. We want to return favors we have received, but also respond appropriately to behavior that we regard as unfair against us. Whereas previous research has typically tried to isolate the most prominent explanations for reciprocal behavior - inherent preferences for reciprocity...

Persistent link: https://www.econbiz.de/10011712663