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We analyze a repeated principal-agent trust game where the principal makes a specific investment by paying the agent up-front, expecting an agreed upon quality level in return. The verifiability of the agent’s action is endogenously determined by the principal’s investment in writing an...

The paper analyzes conditions for implementing incentive schemes based on, respectively joint, relative and independent performance, in a relational contract between a principal and a team of two agents. A main result is that the optimal incentive regime depends on the productivity of the...

We model networks of relational (or implicit)contracts, exploring how sanctioning power and equilibrium conditions change under different network configurations and information transmission technologies. In our model, relations are the links, and the value of the network lies in its ability to...

This paper provides a theoretical rationale for non-binding retail price recommendations (RPRs) in vertical supply relations. Analyzing a bilateral manufacturer-retailer relationship with repeated trade, we show that linear relational contracts can implement the surplus-maximizing outcome. If...

We analyze relational contracts for a set of agents when either (a) only aggregate output or (b) individual outputs are observable. A team incentive scheme, where each agent is paid a bonus for aggregate output above a threshold, is optimal in case (a). The team’s efficiency may increase...

This essay asks what firms are, whether they are ‘real’ social actors, and whether their actions can be traced without remainder to the actions of living people or whether there is some irreducible aspect of their existence or operation that must be attributed to the organization itself. It...

We consider repeated trust game experiments to study the interplay between explicit and relational incentives. After having gained experience with two payoff variations of the trust game, subjects in the final part explicitly choose which of these two variants to play. Theory predicts that...

Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation...

The paper develops a model of repeated interaction between a buyer and a seller, which is then tested via laboratory experiments. The model allows for both formal and informal incentives in the contractual relationship between the parties. Formal incentives are explicit, performance-conditioned...