We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that if the agent faces limited liability and there is an incentive problem the principal prefers not to impose such a clause if and only if the...

everal empirical findings have challenged the traditional trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle on the positive relationship between risk and incentives can be explained.

We analyze the optimal choice of risk in a two-stage tournament game between two players that have different concave utility functions. At the first stage, both players simultaneously choose risk. At the second stage, both observe overall risk and simultaneously decide on effort or investment....

Individuals who compete in a contest-like situation (for example, in sports, in promotion tournaments, or in an appointment contest) may have an incentive to illegally utilize resources in order to improve their relative positions. We analyze such doping or cheating within a tournament game...

We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that not imposing such an agreement can be beneficial for the principal as the possibility to leave the firm generates implicit incentives for the...

We study the long-run effects of initial labor market conditions on wages for a large sample of male individuals entering the Austrian labor market between 1978 and 2000. We find a robust negative effect of unfavorable entry conditions on starting wages. This initial effect turns out to be quite...

In recent decades most developed countries have experienced an increase in income inequality. In this paper, we use an equilibrium search framework to shed additional light on what is causing an income distribution to change. The major benefit of the model is that it can accommodate shocks to...

In the context of principal-agent theory risk is largely seen as a source that causes inefficiencies and lowers incentives and accordingly is not in the principal’s interest. In this paper I compare two different designs of a collective tournament where output in a team is generated through a...

We derive the optimal contract between a principal and a liquidity-constrained agent in a stochastically repeated environment. The contract comprises a court-enforceable explicit bonus rule and an implicit fixed salary promise that must be self-enforcing. Since the agent's rent increases with...

We estimate the effects of labor market entry conditions on wages for male individuals first entering the Austrian labor market between 1978 and 2000. We find a large negative effect of unfavorable entry conditions on starting wages as well as a sizeable negative long-run effect. Specifically,...