In the context of principal-agent theory risk is largely seen as a source that causes inefficiencies and lowers incentives and accordingly is not in the principal’s interest. In this paper I compare two different designs of a collective tournament where output in a team is generated through a...

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

We analyze the optimal choice of risk in a two-stage tournament game between two players that have different concave utility functions. At the first stage, both players simultaneously choose risk. At the second stage, both observe overall risk and simultaneously decide on effort or investment....

Drawing on data from 916 Division 1 men’s college hockey games played during a recent six-year period in the Western Collegiate Hockey Association (WCHA), we find evidence that positive momentum within 458 two-game series does not exist when controlling for team quality. We find that neither...

This paper examines the trade-off between common and peers' specific risks in relative performance evaluation (RPE). We establish that in order to remove common risk completely from management compensation contracts, it is sufficient and necessary that peers' weighted specific risks are lower....

Consider an agent who can costlessly add mean-preserving noise to his output. To deter such risk-taking, the principal optimally offers a contract that makes the agent's utility concave in output. If the agent is risk-neutral and protected by limited liability, this concavity constraint binds...

The presented paper proves that working time arrangements, which include hours flexibility and enable hours deposits, are appealing under product market uncertainty. The model integrates efficiency wage arguments into an implicit insurance-contract environment, thus extending the existing...