This paper develops a global game model that allows for a rigorous analysis of partial deposit insurance and provides the first comparative statics of the optimal level of deposit coverage. The optimal amount of coverage increases with lower bank liquidity requirements, with a higher precision...

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...

We study optimal direct mechanisms for a credence goods expert who can be altruistic or spiteful. The expert has private information about her distributional preferences and possibly also about her customer's needs. We introduce a method that allows the customer to offer separate contracts to...

The paper studies a model of delegated search. The distribution of search revenues is unknown to the principal and has to be elicited from the agent in order to design the optimal search policy. At the same time, the search process is unobservable, requiring search to be self-enforcing. The two...

Private Military and Security Companies (PMSCs) have been gaining increasing media and scholarly attention particularly due to their indispensable role in the wars in Afghanistan 2001 and Iraq 2003. Nevertheless, theoretical insights into the agency problems inherent when hiring PMSCs and how to...

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,...

In this paper, we analyze the equilibrium incentive schemes offered to an agent by two principals who can only observe correlated noisy signals of the one-dimensional action taken by the agent. We look at both cases when the two principals can or cannot cooperate in setting the terms of their...

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...

In order to deliver an innovation principals employ competing agents in some circumstances, while employing research team in other circumstances. This paper compares various structures of R&D to provide a rational behind this observation. It is assumed, that the principal can employ either one...

We consider guilt averse agents and principals and study the effects of guilt on optimal behavior of the principal and the agent in a moral hazard model. The principal's contract proposal contains a target effort in addition to the monetary incentive scheme. By accepting the agreement, the...