In traditional auction theory, the auctioneer is usually treated as a non-entity or someone whose incentives are completely aligned with the seller's. In reality, quite frequently that is not the case. Many auctions are administered by third party auctioneers who do not own the product and get a...

When a principal’s monitoring information is private (non-verifiable), the agent should be concerned that the principal could misrepresent the information to reduce the agent’s wage or collect a monetary penalty. Restoring credibility may lead to an extreme waste of resources—the so-called...

I study the optimal contract when a principal cannot commit to an audit. The contract must provide incentives for the agent to comply as well as for the principal to audit. The key tradeoff is efficiency versus noncompliance instead of the familiar rent versus efficiency. Information rent is...