We analyze a model of moral hazard in local public services which could be efficiently managed by officials under local democratic accountability, but not by officials who are appointed by the ruler of a centralized autocracy. The ruler might prefer to retain an official who diverted resources...

This paper analyzes the principal-agent relationship between a plaintiff and his or her lawyer when the lawyer's investment in discovery is private information. The plaintiff uses the level of the contingency fee and potentially also restrictions on settlements to guide the lawyer's...

In a multi-agent setting, individuals often compare own performance with that of their peers. These comparisons influence agents incentives and lead to a noncooperative game, even if the agents have to complete independent tasks. I show that depending on the interplay of the peer effects, agents...

The probability of income loss depends on talent and effort. Effort has positive externalities and therefore individuals are proportion to their perceived diligence. The social norm requires more effort from individuals perceived as more talented, but talent is private information and...

We conducted six treatments of a standard moral hazard experiment with hidden action. All treatments had identical Nash equilibria. However, the behavior in all treatments and periods was inconsistent with established agency theory (Nash equilibrium). In the early periods of the experiment,...

We extend the theoretical model of external corporate financing to the case when the buyers of the borrowing firm may default during the financing period. In our setup there is an asymmetric information and hence moral hazard between the lender and the borrower concerning the effrts of the...

A standard tournament contract specifies only tournament prizes. If agents' performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive the...