Consider a partnership consisting of two symmetrically informed parties who may each own a share of an asset. It is ex post efficient that tomorrow the party with the larger valuation gets the asset. Yet, today the parties can make investments to enhance the asset's productivity. Contracts are...

"Implicit Contracts, incentive compatibility, and involuntary unemployment" (MacLeod and Malcomson, 1989) remains our most highly cited work. We briefly review the development of this paper and of our subsequent related work, and conclude with reflections on the future of relational contract...

We develop a model of strategic contractual incompleteness that identifies conditions under which principals might omit even costlessly verifiable terms. We then use experiments to test comparative statics predictions of the model. While it is well known that verifiability imperfections can...

In Europe, many countries have completely separated their railways into totally separate infrastructure managers and railway undertakings (train operators) and the European Commission has sought to make such complete vertical separation a legal requirement.

We analyze the optimal decision-making hierarchy in an organization when decision-makers of limited liability have preferences conflicting with the organization's objective and exert externalities on their counterparts. In a horizontal hierarchy, every decision is made by a different agent. In a...

We consider a relational contracting model in which the parties choose to allocate authority either to the principal (centralization) or to the agent (delegation). The party who has authority chooses a project, and the agent exerts effort to successfully execute the project. Delegation generates...

Who should own public projects? We report data from a laboratory experiment with 480 participants that was designed to test Besley and Ghatak's (2001) public-good version of the Grossman-Hart-Moore property rights theory. Consider two parties, one of whom can invest in the provision of a public...

This paper examines the optimal provision of incentives for contract designers. A principal hires an agent to draft a contract that is incomplete because the ex-ante specified design might not be appropriate ex-post. The degree of contract incompleteness is endogenously determined by the effort...

In a multi-agent setting, individuals often compare own performance with that of their peers. These comparisons influence agents incentives and lead to a noncooperative game, even if the agents have to complete independent tasks. I show that depending on the interplay of the peer effects, agents...

This paper presents a moral hazard model analyzing the agent's incentive to commit corporate crime. The principal can only observe profits which the agent can increase by committing crime or exerting effort. It is shown how different incentive contracts, i.e., thresholdlinear, capped bonus and...