We analyze the determinants of value creation and capture in a buyer-supplier relationship. In particular, we study how key contracting parameters, such as production efficiency, transactional integrity, incentive gaming and alignment affect outcomes when buyer faces competing suppliers....

This paper extends the standard principal-agent model with moral hazard to allow for agents having reference-dependent preferences according to Köszegi and Rabin (2006, 2007). The main finding is that loss aversion leads to fairly simple contracts. In particular, when shifting the focus from...

Disability Insurance (DI) may affect workers' outcomes such as their probability to enter DI, to recover, and their employment. Supplementary insurance may increase these moral hazard effects, but also increases the financial gains of private insurers to reduce benefit costs. With increased...

We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish actors become inferior when some agents are concerned about fairness. Conversely, contracts that...

In an agency model with moral hazard and limited liability, we show that the provision of perks can be inefficient, even if perks are contractible. Interestingly, there can be over- as well as underinvestment in perks. We also demonstrate that perks may actually harm the agent, although perks...

This paper analyses three issues in strategic donor-recipient interaction motivated by the complexity of the rationale underlying aid. The first is when we have several principals with conflicting objectives. Any one principal cannot offer high powered incentives to the agent to carry out their...

We examine the second-best family policy under the assumption that both the number and the future earning capacities of the children born to a couple are random variables with probability distributions conditional on unobservable parental actions. Potential parents take their decisions without...

This study models producer protection legislation that would grant growers the right to claim damages (PPLD) if their contracts are prematurely terminated. In the absence of contracting frictions that prevent contractors from redesigning contracts to accommodate exogenous policy changes, PPLD...