Principal-agent models take outside options, determining participation and incentive constraints, as given. We construct a general equilibrium model where workers' reservation wages and the maximum punishment acceptable before workers quit are instead determined endogenously. We simultaneously...

This paper incorporates a risk-neutral principal-agent model with contractual constraints into a random search model to study the interaction between contracting and search in partial and general equilibrium. I introduce heterogeneity in principals' and agents' production technologies in terms...

In a model with private information of the worker about her ability and unobservable effort choice, the role of public and private employment services is analyzed. The coexistence of an inefficient employment exchange and an efficient private agency may lead to optimal screening with first best...

This paper examines the competitive search equilibrium when the workers' effort choice and type are private information. We derive a modified Hosios rule determining the allocation of resources and analyze how private information influences the responsiveness of the unemployment rate to changes...

Dismissal rules, i.e. legally enforced long term contracts, have beem defended against criticism for, among other things, providing efficient incentives to invest in relationship specific skills. However, in many situations efficient investment can also be attained by spot contracts. We...

Previous research has found that agency workers are less satisfied with their job than regular workers on a permanent contract. All these studies have in common that they treat agency workers as a homogeneous group; that is, they did not consider the contract type agency workers hold. This paper...

Employees often learn about their ability while working, and the resulting beliefs interact with pay incentives to shape employment outcomes. This paper investigates this issue within a model that incorporates learning about ability on the job, dynamic selection, effort, and variation in pay...

The escalation of commitment process involves a decision-maker continuing commitment to an investment after receiving negative information. This study develops a principal-agent model to explore how escalation decisions are linked with departures of CEOs from the position. With asymmetric...

We derive the shape of optimal unemployment insurance (UI) contracts when agents can exert search effort but face different search costs and have private information about their type. We derive a recursive solution of our dynamic adverse selection problem with repeated moral hazard. Conditions...

We study optimal incentive contracts for workers who are reciprocal to management attention. When neither worker's effort nor manager's attention can be contracted, a double moral-hazard problem arises, implying that reciprocal workers should be given weak financial incentives. In a...