This paper studies team design in the context of a standard risk-neutral principal-agent model with contractual constraints. I introduce heterogeneity in agents' technologies in terms of how agents shift probability mass across states of nature when they exert effort. Moral hazard and...

This paper studies the relationship between moral hazard and the matching structure of teams. We show that team incentive problems may generate monotone matching predictions in the absence of complementarities in the production technology. Second, we analyze how complementarity in the underlying...

Economic theory regarding moral hazard at work is somewhat at odds with recent business evidence. Whereas firms in economically and technologically stable environments could apparently follow conventional wisdom when trying to reduce moral hazard through tight supervision and incentive packages,...

Top management faces two key organizational design choices: (1) how much authority to delegate to lower-level managers, and (2) how to design incentive compensation to ensure that these managers do not misuse their discretion. Although theoretical accounting literature has emphasized the joint...

Pure incentive schemes rely on agent self-interest, rather than more coercive control, to motivate subordinates. Yet most organizations, and in particular public agencies, rely very little on pure incentive contracts. Most organizations rely on the primarily coercive mechanisms of monitoring and...

We address the question of how the internal organization of partnerships can be affected by moral hazard behavior of their division(s)/agent(s). We explore cases where two entregreneurs, each employing one agent subject ot moral hazard, decide how to conduct a research project together. The...

The paper analyzes how the choice of organizational structure leads to the best compromise between controlling behavior based on authority rights and minimizing costs for implementing high efforts. Concentrated delegation and hierarchical delegation turn out to be never an optimal compromise. If...

The paper analyzes the choice of organizational structure as solution to the trade-off between controlling behavior based on authority rights and minimizing costs for implementing high efforts. The analysis includes the owner of a firm, a top manager and two division heads. If it is more...

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...

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...