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Several empirical findings have challenged the traditional view on the 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....
Persistent link: https://www.econbiz.de/10005785785
This paper analyzes bilateral contracting in an environment with contractual incompleteness and asymmetric information. One party (the seller) makes an unverifiable quality choice and the other party (the buyer) has private information about its valuation. A simple exit option contract, which...
Persistent link: https://www.econbiz.de/10005785786
We model the trade-off between centralized and decentralized decision making over the provision of local public goods. Centralized decisions are made in a legislature of locally elected representatives, and this creates a conflict of interest between citizens in different jurisdictions. The...
Persistent link: https://www.econbiz.de/10005785787
If a seller delivers a good non-conforming to contract, European and US warranty law allows consumers to choose between some money transfer and termination. Termination rights are, however, widely criticized, mainly for fear that the buyer may use non-conformity as a pretext for getting rid of a...
Persistent link: https://www.econbiz.de/10005785788
We formalize a conception of authority, which is commonly defined as the right of controlling a person’s actions embedded in human assets in sociology. Due to the inalienable property of human assets, the contractible formal authority is hard to verify and enforce, while real authority...
Persistent link: https://www.econbiz.de/10005785789
Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004This paper explores predictability of behavior in coordination games with multiple equilibria. In a laboratory experiment we measure subjects' certainty equivalents for three coordination games and one lottery. Attitudes...
Persistent link: https://www.econbiz.de/10005785790
The present paper examines an injurer causing a temporary blackout to a firm as the primary victim but also affecting customers and competitors of the firm. Reflecting existing legal practice, the paper investigates efficiency properties of the negligence rule granting recovery of private losses...
Persistent link: https://www.econbiz.de/10005785791
Heifetz, Meier and Schipper (2005) introduced a generalized state-space model that allows for non-trivial unawareness among several individuals and strong properties of knowledge. We show that this generalized state-space model arises naturally if states consist of maximally consistent sets of...
Persistent link: https://www.econbiz.de/10005785792
Partnerships are the prevalent organizational form in many industries. Most partnerships share profits equally among the partners. Following Kandel and Lazear (1992) it is often argued that "peer pressure" mitigates the arising free-rider problem. This line of reasoning takes the equal sharing...
Persistent link: https://www.econbiz.de/10005785793
We provide an evolutionary foundation to evidence that in some situations humans maintain optimistic or pessimistic attitudes towards uncertainty and are ignorant to relevant aspects of the environment. Players in strategic games face Knightian uncertainty about opponents’ actions and...
Persistent link: https://www.econbiz.de/10005785794