We study how to efficiently motivate policy-makers to solve political multitask problems. Political multi-task problems typically have outcomes that are difficult to measure. Moreover, there are conflicts among citizens about optimal policies and the agents have the power to tax the citizens to...

We examine optimal managerial compensation and turnover policy in a principal-agent model in which the firm output is serially correlated over time. The model captures a learning-by-doing feature: higher effort by the manager increases the quality of the match between the firm and the manager in...

This paper seeks to characterize incentive compensation in a static principal-agent moral hazard setting in which both the principal and the agent are prudent (or downside risk averse). We show that optimal incentive pay should then be `approximately concave' in performance, the approximation...

We address empirically the issues of the optimality of simple linear compensation contracts and the importance of asymmetries between firms and workers. For that purpose, we consider contracts between the French National Institute of Statistics and Economics (Insee) and the interviewers it hired...

This paper introduces a relative performance prize scheme to best-of-N contests. We develop a theoretical model of the best-of-N contest with intermediate prizes distributed based on the players' relative performance. The model predicts that a relative performance prize scheme both increases the...

We examine theoretically and experimentally how combining between-team and within-team incentives affects behavior in team tournaments. Theory predicts that free-riding is likely to occur when there are only between-team incentives, and offering within-team incentives may solve this problem....

Incentives often distort behavior: they induce agents to exert effort but this effort is not employed optimally. This paper proposes a theory of incentive design allowing for such distorted behavior. At the heart of the theory is a trade-off between getting the agent to exert effort and ensuring...

It may be surprising that one of the most popular compensation schemes in business is so open to being hacked - to having managers cheat to win. We explore tournament theory to detail its vulnerabilities to various forms of cheating unilateral and multilateral. We identify who is most likely to...

We show experimentally that fairness concerns may have a decisive impact on the actual and optimal choice of contracts in a moral hazard context. Bonus contracts that offer a voluntary and unenforceable bonus for satisfactory performance provide powerful incentives and are superior to explicit...