This paper proposes a principal-agent model of moral hazard and adverse selection that introduces the notion of screening, which is distinct from sorting; and distinguishes between ability that is privately known by the agent versus general ability that is observable by the principal and market....

This paper proposes a principal-agent model of moral hazard and adverse selection that introduces the notion of screening, which is distinct from sorting; and distinguishes between ability that is privately known by the agent versus general ability that is observable by the principal and market....

We investigate analytically and empirically the relationship between demand uncertainty and cost behavior. We argue that with more uncertain demand, unusually high realizations of demand become more likely. Accordingly, firms will choose higher capacity of fixed inputs when uncertainty increases...

We propose an analytical model that integrates two parallel independent streams of the literature, agency theory and organizational control theory. In doing so, we provide new insights into agency theory by introducing the concept of a congruent agent, and new insights into organizational...

This paper analyzes the tradeoffs associated with relying on performance versus ability measures in executive compensation. We propose a principal-agent model in which the principal designs the compensation scheme to be contingent on the outcome of interest to the principal along with a noisy...

This paper proposes an agency model with moral hazard and adverse selection of the relationship between a university and its president, and constructs a unique dataset to examine the determinants of the compensation of university presidents. In our model, the outcome of interest to the...

This paper examines the role of multiple measures of performance in a principal-agent model incorporating both moral hazard and adverse selection. The outcome of interest to the principal depends stochastically on the agent’s unobservable ability and effort, while the principal implements a...