We examine optimal individual and entity-level liability for negligence when expected accident costs depend on both the agent's level of expertise and the principal's level of authority. We consider these issues in the context of physician and managed care organization (MCO) liability for...

In the 1980s and 1990s many states adopted tort reforms. It has been argued that these reforms have reduced the practice of defensive medicine arising from excess tort liability. We find that this does not appear to be true for a large and important class of cases-childbirth in the United...

An increasing fraction of jobs in the U.S. labor market explicitly pay workers for their performance using bonus pay, commissions, or piece-rate contracts. Using data from the Panel Study of Income Dynamics, we show that compensation in performance-pay jobs is more closely tied to both observed...

This paper studies the effect of sunk cost on equilibria for a dynamic oligopoly with entry. Sunk costs are a hysteresis effect that cannot be adequately modelled in a static framework. When sunk costs are added to a dynamic model they do not act as a barrier to entry, contrary to general...

This paper characterizes all outcomes supportable by implicit employment contracts of the most general form when employee's performance is not public information. A strictly positive economic surplus must result from employment, the form of contract depending on how this surplus is divided...

This paper studies the effect of information and sunk costs on the set of equilibria for a dynamic oligopoly model that incorporates price and entry/exit decisions. Contrary to the accepted view, sunk costs do not act as a barrier to entry, but in general cause excessive entry. When entry and...

This paper develops and applies a model in which doctors have two dimensions of skill: diagnostic skill and skill performing procedures. Higher procedural skill increases the use of intensive procedures across the board, while better diagnostic skill results in fewer intensive procedures for the...