This paper investigates how compensation structure affects performance in a simple but effort-consuming task. In this experimental study, the subjects were asked to multiply two-digit numbers for 40 min and were paid using either a linear (with different pay for performance sensitivities) or a...

This paper presents the results of an experimental study on jump bidding in takeover auctions with entry costs. It provides support for signaling hypothesis behind jump bidding and analyzes how the size of the entry costs affects the bidders' behavior and their expected profits. It also shows...

This paper analyzes an optimal incentive contract for an overoptimistic manager who overestimates the investment potential of the firm. It shows that, compared with a rational manager, an overoptimistic manager is willing to accept a linear incentive contract with a lower fixed wage. At the same...

Purpose – Existing empirical studies that document momentum trading strategies do not provide any insight on how investors choose the time horizon that is used to compute the past stock returns. Indeed, since past returns over overlapping time periods are positively correlated, it is hard to...

This paper presents the results of an experimental study aimed to understand how the past stock performance affects investor's desire to buy or sell the stock. It shows that people prefer to buy stocks that performed well in the past. However, when investors must sell one of the stocks they...

This paper analyzes a model of preemptive jump bidding in private value takeover auctions with entry costs. It shows that when the second bidder owns a fraction of the target firm preemptive jump bidding leads to a higher social surplus, improves the expected profit of both bidders and reduces...