We revisit the contract-theoretic literature on privatization initiated by Hart et al. (1997). This literature has two major shortcomings. First, it is focused on ex-ante investment incentives, whereas ex-post inefficiencies which are ubiquitous in the real world cannot be explained. Second,...

The literature on public transit services contracting, emphasizes the need of efficient contracting designs to promote parties’ interest alignment. There is, however, limited research addressing specific incentive mechanisms. The paper contributes to that literature by developing a...

We examine how the U.S. Federal Government governs R&D contracts with private-sector firms. The government chooses between two contractual forms: grants and cooperative agreements. The latter provides the government substantially greater discretion over, and monitoring of, project progress....

The privatization literature depicts the choice whether to contract out as a tradeoff between excessive private investment in quality-reducing cost saving and inadequate public investment in cost-increasing quality improvement, under circumstances where neither the amount of investment nor the...

This paper offers a rationale for limiting the delegation of (real) authority, which neither relies on insurance arguments nor depends on ownership structure. We analyse a repeated hidden action model in which the actions of a risk neutral agent determine his future outside option. Consequently,...

In a public procurement setting, we discuss the desirability of completing contracts with state-contingent clauses providing for monetary compensations to the contractor when revenue shocks occur. Realized shocks are private information of the contractor and this creates agency costs of...

In a public procurement setting, we discuss the desirability of completing contracts with state-contingent clauses providing for monetary compensations to the contractor when revenue shocks occur. Realized shocks are private information of the contractor and this creates agency costs of...

Corporate scandals, reflected in excessive management compensation and fraudulent accounts, cause considerable damage. Agency theory's insistence on linking the compensation of managers and directors as closely as possible to firm performance is a major reason for these scandals. They cannot be...

The first scholars to propose, explicitly, that a theory of agency be created, and to actually begin its creation, were Stephen Ross and Barry Mitnick, independently and roughly concurrently. Ross is responsible for the origin of the economic theory of agency, and Mitnick for the institutional...

This article has been significantly revised. Please refer to the revised version, titled “Allocating Regulatory Resources”, which is available on SSRN at: 'http://ssrn.com/abstract=2304434' http://ssrn.com/abstract=2304434.This article incorporates the concept of legal placebo effects into...