Contract theory predicts that workers are remunerated based on all available unbiased individual performance measures. In the real world, measures are often biased: tasks are too complex to include all measures, unforeseen contingencies occur for which contracts specify nothing, and the...

Contract theory predicts that workers are remunerated based on all available unbiased individual performance measures. In the real world, measures are often biased: tasks are too complex to include all measures, unforeseen contingencies occur for which contracts specify nothing, and the...

A standard hidden information model is considered to study the influence of the a priori productivity distribution on the optimal contract. A priori more productive (hazard rate dominant) agents work less, enjoy lower rents, but generate a higher expected surplus.

We investigate a team setting in which workers have different degrees of commitment to theoutcome of their work. We show that if there are complementarities in production and if theteam manager has some information about team members, interventions that the managerundertakes in order to assure...

How does the environment of an organization inuence whether workersvoluntarily provide eort? We study the power relationship betweena non-prot unit (e.g. university department, NGO, healthtrust), where workers care about the result of their work, and a bu-reaucrat, who supplies some input to the...

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...

Bubbles in asset markets have been documented in numerous experimentalstudies. However, all experiments in which bubbles occurpay dividends after each trading day. In this paper we study whetherbubbles can occur in markets without dividends. We investigate therole of two features that are...

When designing incentives for a manager, the trade-off between insuranceand a “good” allocation of effort across various tasks is oftenidentified with a trade-off between the responsiveness (sensitivity, precision,signal-noise ratio) of the performance measure and its similarity(congruity,...