In this paper I summarize four new strands in agency theory that help me think about incentives in real organizations. As a point of departure, I being with a quick sketch of the classic agency model. I then discuss static models of objective performance measurement in which firms get what they...

We develop a dynamic model of learning and wage determination: education may convey initial information about ability, but subsequent performance observations also are informative. Although the role of schooling in the labor market's inference process declines as performance observations...

This paper surveys two related pieces of the labor-economics literature: incentive pay and careers in organizations. In the discussion of incentives, I first summarize theory and evidence related to the classic agency model, which emphasizes the tradeoff between insurance and incentives. I then...

Investment decisions require trading off current expenditures against future revenues. If revenues extend far enough into the future, the executives responsible for designing long-run investment policy may no longer be in office by the time all the revenues are realized. We present evidence...

This paper uses recent results from incentive theory to study heretofore informal critiques of piece-rate compensation schemes. Th e informal critiques are based on the history of failed attempts to i nstall piece-rate compensation schemes at the turn of the century. Th e formal analysis...

This paper studies optimal incentive contracts when workers have career concerns--concerns about the effects of current performance on future compensation. The authors show that the optimal compensation contract optimizes total incentives: the combination of the implicit incentives from career...

Physicians prescribing drugs for patients with schizophrenia and related conditions are remarkably concentrated in their choice among antipsychotic drugs. In 2007 the single antipsychotic drug prescribed by a physician accounted for 66% of all antipsychotic prescriptions written by that...