There is increasing empirical and experimental evidence thatproviding financial incentives to agents to performcertain socially desirable actions may permanently reduce other typesof motivations to undertake these actions.We study the impact of financial incentives on the desire for...

We analyze dynamic risk-sharing contracts between profit-maximizing insurers and risk-averse agents who face idiosyncratic income uncertainty and can self-insure through savings. We study Markov-perfect insurance contracts in which neither party can commit beyond the current period. We show that...

For the past 30 years, the conventional wisdom has been that executive compensation packages should include very large proportions of incentive pay. This incentive pay orthodoxy has become so firmly entrenched that the current debates about executive compensation simply take it as a given. We...

We analyze the contracting structure in a moral hazard setting with several agents whereoutput is produced jointly and is the only contractible variable. Since the salary of each agentis a function of all agents efforts, a positive externality arises between them. This externalityis not...

Results from laboratory experiments using real-effort tasks provide mixed evidence on the relationship between monetary incentives and effort provision. To examine this issue, we design three experiments where subjects participate in two-player real-effort tournaments with two prizes. Experiment...

We study dynamic moral hazard when the principal can only commit to spot contracts. Principal and agent are ex ante symmetrically uncertain about the difficulty of the job, and update their beliefs on observing output. Since the agent's effort is private, he has an additional incentive to shirk...

This study addresses the factors that determine the intensity of pay for performance schemes. The results indicate that the use of individual and group incentives boost intensity, whereas plant or firm pay for performance do not seem to affect the variable of interest. In addition, the adoption...