The literature on incentive contracting suggests that the optimal performance pay contract depends on a tradeoff between productivity and agency costs. The effect of employee ability on this tradeoff is theoretically ambiguous, as the employee’s private gains (through more sophisticated gaming...

This paper explores conflicting implications of firm-specific human capital (FSHC) for firm performance. Existing theory predicts a productivity effect that can be enhanced with strong incentives. We propose an offsetting agency effect: FSHC may facilitate more sophisticated “gaming” of...

We investigate the mechanisms that shape social comparison in organizations and generate social comparison costs. In particular, we focus on heterogeneity in the strength and type of incentives and argue that, from an efficient design perspective, such variance in rewards is a double-edged...

We study organizational search in the presence of intuitive biases. Drawing from work on the psychology of human decision making, we construe biases as unjustified preferences that arise due to automatic, spontaneous thinking. This property of decision making gives rise to a mechanism we label...

We investigate the mechanisms that shape social comparison in organizations and generate social comparison costs. Drawing on the notions of inequity aversion and envy, we argue that heterogeneity in the strength and type of incentives provides an impetus for envy, and that the resulting social...