I study optimal incentive contracting in a two-period model in which an agentʼs action generates an output with delay, and a noisy signal of output early. Under very general conditions, the optimal contract depends on the early signal as well as on output even if the signal is uninformative of...

We study financial contracting when both an entrepreneur's investment and the resulting revenue are unobservable to an outside investor. We show that a debt contract is always optimal; repayment is induced by a liquidation threat that increases with the extent of default. Moreover, when the...

This Paper examines how the investment of financially constrained firms varies with their level of internal funds. We develop a theoretical model of optimal investment under financial constraints. Our model endogenizes the costs of external funds and allows for negative levels of internal funds....

We test the effectiveness of team incentives by running a natural field experiment in a retail chain of 193 shops and 1,300 employees. As a response to intensified product market competition, the firm offered a bonus to shop teams for surpassing sales targets. A bonus to teams rather than...

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

We conduct experimental games with police applicants in Germany to investigate whether intrinsically motivated agents self-select into public service. Our focus is on trustworthiness and the willingness to enforce norms as key dimensions of intrinsic motivation in the police context. We find...