Within a laboratory experiment we investigate a principal-agent game in which agents may,first, self-select into a group task (GT) or an individual task (IT) and, second, choose workeffort. In their choices of task and effort the agents have to consider pay contracts for bothtasks as offered by...

Consider a principal-agent relationship in which more eort by the agent raises thelikelihood of success. Does rewarding success, i.e., paying a bonus, increase eort inthis case? I nd that bonuses have not only an incentive but also an income eect.Overall, bonuses paid for success may well reduce...

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...

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...

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...

Consider a principal-agent relationship in which more effort by the agent raises the likelihood of success. Does rewarding success, i.e., paying a bonus, increase effort in this case? I find that bonuses have not only an incentive but also an income effect. Overall, bonuses paid for success may...

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...

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...

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 Bartling, Fehr and Schmidt (2012) we show theoretically and experimentally that it is optimal to grant discretion to workers if (i) discretion increases productivity, (ii) workers can be screened by past performance, (iii) some workers reciprocate high wages with high effort and (iv)...