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...

We analyze whether a principals decision to layoff an agent affects the performance of the surviving agents. To study the impact of the decision in isolation, we conducted an experimental principal-agent game. We find that agents reduce their performance by 37% as a response to the decision....

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...

I estimate a dynamic agency model to quantify the importance of dismissals in CEO incentives -vis-à-vis pecuniary compensation. The model features endogenous dynamics in deferred and flow compensation, as well as exogenous departures, and endogenous dismissals after poor firm performance. Thus,...

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...

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...

Government bureaus with higher percentages of furloughed employees during the 2013 government shutdown experienced more employee turnover for two years after the shutdown. This lost workforce was not replenished after employee exits stabilize, at least not within four years after the shutdown....

Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyze this issue in a principal-agent model, focusing on unemployment levels and labor productivity. In our model, a higher...