A performance standard's horizon is the time given to achieve the standard. Horizons vary considerably in practice, and the goal-setting literature provides mixed evidence on whether short or long horizons are more effective at eliciting effort from workers. I predict and find that uncertainty...

Compensation schemes have been blamed for encouraging excess risk-taking on the part of managers within the financial system and real economy. In general, compensation cannot decrease below the base salary, while gains from bonuses can be limitless. The potential link between compensation and...

Firms differ in the extent to which they use variable pay. Using U.S. employeeemployer matched data on variable pay from Glassdoor, we document such dispersion and find workers are exposed to firm-level shocks through variable pay. Credit rating downgrades from investment to speculative grade,...

I investigate the decision problem of a player in a game of incomplete information who faces uncertainty about the other players' strategies. I propose a new decision criterion which works in two steps. First, I assume common knowledge of rationality and eliminate all strategies which are not...

We study a stochastic version of Fudenberg -- Tirole's preemption game. Two firms contemplate entering a new market with stochastic demand. Firms differ in sunk costs of entry. If the demand process has no upward jumps, the low cost firm enters first, and the high cost firm follows. If leader's...

The Association of Southeast Asian Nations (ASEAN) intends to create the ASEAN Economic Community (AEC) as a single market, to be completed by 2020. The single market will boost the competition in both ASEAN's internal and external markets, which will spur innovation. Creative innovation will...

We consider an incomplete information network game in which agents’ information is restricted only to the identity of their immediate neighbors. Agents form beliefs about the adjacency pattern of others and play a linear-quadratic effort game to maximize interim payoffs. We establish the...