Splitting leagues or tournaments seems to be puzzling when agents are homogeneous and splitting leads to a negative competition effect. However, it can be shown that the principal can nevertheless benefit from splitting. First, splitting can be used as a divide-and-rule strategy by the principal...

everal empirical findings have challenged the traditional trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle on the positive relationship between risk and incentives can be explained.

Rank-order tournaments are usually modeled simultaneously. However, real tournaments are often sequential. We show that agents’ strategic behavior in sequential-move tournaments significantly differ from the one in simultaneous-move tournaments: In a sequential-move tournament with...

In this paper, we combine the strategic delegation approach of Fershtman-Judd-Sklivas with contets. The results show that besides a symmetric equilibrium there also exist asymmetric equilibria in which one owner induces pure sales maximization to his manager so that all the other firms drop out...

We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that if the agent faces limited liability and there is an incentive problem the principal prefers not to impose such a clause if and only if the...

We analyze a two-stage game between two heterogeneous players. At stage one, common risk is chosen by one of the players. At stage two, both players observe the given level of risk and simultaneously invest in a winner-take-all competition The game is solved theoretically and then tested by...

We analyze the optimal choice of risk in a two-stage tournament game  between two players that have different concave utility functions. At the first stage, both players simultaneously choose risk. At the second stage, both observe overall risk and simultaneously decide on effort or investment....

We highlight two effects of a works council that seem contradictory: the rent-seeking effect, which claims that a works council is set up by the workers to extract large rents from their employer, and the employment-security effect, which asserts that a works council is founded if the firm is...

We consider a two-stage principal-agent model with limited liability in which a CEO is employed as agent to gather information about suitable merger targets and to manage the merged corporation in case of an acquisition. Our results show that the CEO systematically recommends targets with low...

The paper analyzes the choice of organizational structure as solution to the trade-off between controlling behavior based on authority rights and minimizing costs for implementing high efforts. The analysis includes the owner of a firm, a top manager and two division heads. If it is more...