The relationship between a venture capitalist and an entrepreneur is modeled to investigate the impact of public subsidies on venture capital investments in start-up enterprises. In this model, the venture capitalist only finances start-up enterprises if he has sufficient expertise to make...

This paper analyses the impact of public equity schemes on venture capitalist's incentives to finance start-up enterprises and to support the management teams. In a double-sided moral hazard model, it is shown that experienced venture capitalists, who have already financed start-up enterprises,...

Consider a two-product firm that decides on the quality of each product. Product quality is unknown to consumers. If the firm sells both products under the same brand name, consumers adjust their beliefs about quality subject to the performance of both products. We show that if the probability...

We attempt to formulate and explain two types of self-fulfilling prophecy, called the Pygmalion effect (if a supervisor thinks her subordinates will succeed, they are more likely to succeed) and the Galatea effect (if a person thinks he will succeed, he is more likely to succeed). To this...

Several empirical studies provide evidence that their actual health state affects people's attitudes towards health and medical care in hypothetical health states. In the tradition of behavioural economics this paper considers the actual health state as a point of reference and builds a model...

We derive the shape of optimal unemployment insurance (UI) contracts when agents can exert search effort but face different search costs and have private information about their type. We derive a recursive solution of our dynamic adverse selection problem with repeated moral hazard. Conditions...

We consider guilt averse agents and principals and study the effects of guilt on optimal behavior of the principal and the agent in a moral hazard model. The principal's contract proposal contains a target effort in addition to the monetary incentive scheme. By accepting the agreement, the...

Several empirical findings have challenged the traditional view on the trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empiri- cal puzzle on the positive relationship between risk and incentives can be explained....

We analyse pricing, effort and tipping decisions in the online service Google Answers. While users set a price for the answer to their question ex ante, they can additionally give a tip to the researcher ex post. In line with the related experimental literature we find evidence that tipping is...

We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We...