A monopolist sells goods with possibly a characteristic consumers dislike (for instance, he sells random goods to risk averse agents), which does not affect the production costs. We investigate the question whether using undesirable goods is profitable to the seller. We prove that in general...

One-shot interaction and repeated interaction often co-exist in the real world. We study possible behavioral effects of this co-existence in a principal-agent setting, in which a principal simultaneously employs a permanent and a temporary agent. Our experimental results indicate that there is...

This article provides additional empirical evidence concerning the choice of the mule as the dominant draft animal in southern agricultural production in the latter 19th and early 20th century. While the mule was uniquely suited to the crops and climate of the region, two divergent arguments...

This paper identifies a class of multiperiod agency problems in which the optimal contract is tractable (attainable in closed form). By modeling the noise before the action in each period, we force the contract to provide sufficient incentives state-by-state, rather than merely on average. This...

Contracts in a dynamic model must address a number of issues absent from static frameworks. Shocks to firm value may weaken the incentive effects of securities (e.g. cause options to fall out of the money), and the impact of some CEO actions may not be felt until far in the future. We derive the...

It has long been standard in agency theory to search for incentive-compatible mechanisms on the assumption that people care only about their own material wealth. However, this assumption is clearly refuted by numerous experiments, and we feel that it may be useful to consider nonpecuniary...