This paper develops a framework for the analysis of how asymmetric information impacts on adverse selection and market efficiency.  We adopt Akerlof's (1970) unit-demand model extended to a setting with multidimensional public and private information.  Adverse selection and efficiency are...

Many incentives in organizations arise not through explicit formal incentive contracts but rather implicitly through career concerns. This paper models career concerns through agents trying to manipulate the market assessment of their future productivity. The information flow from current...

It is of interest to know when the incentive compatibility conditio n in principal-agent problems can be replaced by the condition that the agent's expected utility be stationary in effort. The Mirrlees-Rogerson conditions do not work if the principal can observe more than one observable...

We study the moral hazard problem with general upper and lower constraints M on compensation. We characterize the optimal contract and show existence and uniqueness. When minimizing costs for given effort, a principal harmed by M will pay according to M on some range of outcomes; when M reflects...

We consider expected utility maximizers choosing from a family of risky prospects and examine how choice is influenced by the decision makers attitude to risk. If the family of risky prospects can be ordered so that as decision makers are more risk tolerant they choose a gamble higher in the...

This paper discusses proposed governance reforms of legal services markets. The model distinguishes between a status quo position supported by a system of professionally enforced collective reputation and forms of governance based more squarely on market mechanisms. We identify a number of...