This paper analyzes how on-the-job search (OJS) by an agent impacts the moral hazard problem in a repeated principal-agent relationship. OJS is found to constitute a source of agency costs because efficient search incentives require that the agent receives all gains from trade. Further, the...

We study an infinitely repeated principal-agent relationship with on-the-job search. On-the-job search is modeled as a dimension of the agent's effort vector that has no effect on output, but raises his future outside option. The agent's incentives to search are increasing in the degree to which...

type="main" xml:lang="en" <title type="main">Abstract</title> <p>We analyze the use of information in an oligopolistic insurance market with costly market entry. For intermediate values of entry costs, an equilibrium exists that is profit maximizing for incumbents and in which companies do not discriminate between high and...</p>

We consider a long-lived firm that faces an infinite sequence of finitely-lived consumers. In each period, the firm can exert either high or low effort, which is the firm's private information. When consumers learn about the firm's talent from the outcomes of previous transactions, there exists...

We analyze distributional preferences in games in which a decider chooses the provision of a good that benefits a receiver and creates costs for a group of payers. The average decider takes into account the welfare of all parties and has concerns for efficiency. However, she attaches similar...

We analyze the use of information in an oligopolistic insurance market with costly market entry. For intermediate values of entry costs, an equilibrium exists that is profit maximizing for incumbents and in which companies do not discriminate between high and low risks. The model therefore...

Many markets without repeated seller–buyer relations feature third-party “monitors” that sell recommendations. We analyze the profit-maximizing recommendation policies of such monitors. In an infinitely repeated game with seller moral hazard and short-lived consumers, a monopolistic...

We examine trust and trustworthiness of individuals with varying professional preferences and experiences. Our subjects study business and economics in Frankfurt, the financial center of Germany and continental Europe. In the trust game, subjects with a high interest in working in the financial...

We study the infinitely repeated prisonerʼs dilemma with the option to maintain or to quit relationships. We show that if agents imitate successful strategies infrequently, defection is not dynamically stable and cooperation emerges regardless of the initial distribution of strategies.

We develop an insurance market model where consumers (i) exhibit present-biased preferences, and (ii) suffer from physical pain in case of (health-) damage. They can exert preventive effort to reduce the probability of damage. Sophisticated consumers correctly anticipate their effort and...