To generate downstream sales, manufacturers often spend both effort and compensation when working with their dealers. Existing theories are inconclusive about the interdependent role of the two kinds of instruments in motivating dealer effort; that is, whether they are substitutes or...

A manager's compensation contract and the level of resources available to him jointly influence his incentives to acquire information about different investment alternatives as well as his resource allocate decisions. We show that the optimal compensation contract induces investment allocations...

How does imperfect contractibility of preferences influence the governance of a contractual relationship? We analyze a two-party decision-making problem where the optimal decision is unknown at the time of contracting. In consequence, instead of contracting on the decision directly, the parties...