We provide a condition for ranking of information systems in agencyproblems. The condition has a straightforward economic interpretation in terms of the sensitivity of a cumulative distribution with respect to the agents effort. The criterion is shown to be equivalent to the mean preserving...

This paper analyzes the trade-o! between monitoring and incentives in a principal-agent relationship with moral hazard. We derive general results on the optimalmonitoring - incentives mix for the case where both parties are risk-neutral and the agentfaces a limited liability constraint. We show...

This paper analyzes the incentive properties of the standard and burden of proof for a finding of negligence, when evidence about injurers' behavior is imperfect and rests with the parties. We show that the `preponderance of evidence' standard used in common law, together with ordinary exclusion...

We consider the effects on reward systems of workers concern withrelative pay by comparing the wage costs of providing incentives through groupversus individual bonus schemes. When workers have a propensity for envy, eitherscheme may be the least cost one depending on the workers outside...

We consider the cost of providing incentives through tournaments when workers are inequity averse and performance evaluation is costly.

We argue that the common-law standard of proof, given the rulesof evidence, does not minimize expected error as usually argued inthe legal literature, but may well be e±cient from the standpointof providing maximal incentives for socially desirable behavior.By contrast, civil law's higher but...

We analyze the design of legal principles and procedures for court decision-making in civil litigation. The objective is the provision of appropriate incentives for potential tort-feasors to exert care, when evidence about care is imperfect and may be distorted by the parties. Efficiency is...

We provide a condition for ranking of information systems in agency problems. The condition has a straightforward economic interpretation in terms of the sensitivity of a cumulative distribution with respect to the agent's effort. The criterion is shown to be equivalent to the mean preserving...

This paper analyses whether liability insurance is socially desirable, under strict liability or under the negligence rule, when the injurer?s behavior is imperfectly observable. Liability insurance is known to be socially beneficial under the strict liability rule, even though it can reduce...

This paper analyzes the efficient use of information in an agency relationship with moral hazard, when parties are risk-neutral. We show that, given an arbitrary information system, all relevant information from a mechanism-design point of view can be summarized by a binary statistic. We then...