We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a...

Using the concept of Inequity Aversion we derive in a Moral Hazard setting several results which differ from conventional contract theory. Our three key insights are: First, inequity aversion plays a crucial role in the design of optimal contracts. Second, there is a strong tendency towards...

Multi-unit auctions are sometimes plagued by the so-called exposure problem. In this paper, we analyze a simple game called the 'chopstick auction' in which bidders are confronted with the exposure problem. We analyze the chopstick auction with incomplete information both in theory and in a...

In corporate practice, incentive schemes are often complicated even for simple tasks. Hence, the way they are communicated might matter. In a controlled field experiment, we study a minimally invasive change in the communication of a well-established incentive scheme - a reminder regarding the...

We provide evidence that German savings banks - where local politicians are by law involved in their management - systematically adjust lending policies in response to local electoral cycles. The different timing of county elections across states and the existence of a control group of...

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...

Recent laboratory evidence suggests that personality traits, in particular social preferences, may affect contractual outcomes under moral hazard. Using the British Workplace Employment Relations Survey 2004 we find that behaviour of employers and employees is consistent with the presence of...

We use more than 63,000 datapoints from a German used car market website to document systematic and substantial price drops at vintage (= year of first registration) thresholds and 10,000 km odometer marks. The latter finding replicates the findings in Lacetera et al. (2012), whereas the first...

We provide an overview over different literature streams that aim at explaining the origin of persistent productivity differences across organization by variation in the use of management practices. We focus on human resource management (HRM) practices, document gaps in the literature, and show...

We provide evidence that German savings banks - where local politicians are by law involved in their management - systematically adjust lending policies in response to local electoral cycles. The different timing of county elections across states and the existence of a control group of...