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We develop a two-period general equilibrium model of portfolio delegation with competitive, differentially skilled managers and convex compensation contracts. We show that convex incentives lead to significant equilibrium mispricing, but reduce price volatility. In particular, price...
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The escalation of commitment process involves a decision-maker continuing commitment to an investment after receiving … escalating commitment to failing investments and leaving the firm before the outcome of investment decisions is disclosed … publicly. Results of empirical analysis based on a sample of over 3,000 US firms are consistent with the theory and demonstrate …
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This chapter surveys studies that have used the methods of mechanism design, optimal taxation, nonlinear pricing, and principal-agent analyses in the analysis of agricultural policy. The optimal design and reform of agricultural policy are studied under the presumption that agricultural...
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We study contracting when both principal and agent have to exert noncontractible effort for production to take place. An analyst is uncertain about what actions are available and evaluates a contract by the expected payoffs it guarantees to each party in spite of the surrounding uncertainty....
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