This paper examines a principal-agent problem between a manager (principal) and an employee (agent). At the contracting date uncertainty with regard to the profitability of the relationship is present. Once the contract is signed, the employee performs a specific investment that reduces his...

In a controlled laboratory experiment, subjects had to fold letters in order to earn money. While the net income per letter was the same in the three treatments, the gross income varied and the tax rate was 0, 25% and 50%. Although work incentives should be the same in all treatments, subjects...

We reexamine the claim that the effect of income on subjective well-being suffers from a systematic downward bias if one ignores that higher income is typically associated with more work effort. We analyze this claim using German panel data, controlling for individual unobserved heterogeneity,...

We apply the Day Reconstruction Method to compare unemployed and employed people with respect to their subjective assessment of emotional affects, differences in the composition and duration of activities during the course of a day, and their self-reported life satisfaction. Employed persons are...

If the production of a risk-neutral monopolist is in uenced by a random variable, then the expected prot is decreasing in the variance of the production process.

We analyze intraday trades of German stocks (Daimler Chrysler and SAP) that are traded simultaneously at the German stock market XETRA and the New York Stock Exchange (NYSE). At first glance, the stock price clustering seems to be less pronounced at the NYSE. But after converting Euro-prices...

When appointing a representative in negotiations, the principal can o er his agent a offer contract that promises a percentage of the bargaining result, and a bonus payment result (or penalty) if bargaining fails. Conventional wisdom of contract theory seems to suggest that the share should be...

Although the concept of utility is fundamental to many economic theories, up to now a generally accepted method determining a subject’s utility function is not available. We investigated two methods that are used in economic sciences for describing utility functions by using response-locked...