Abstract This article argues that the existence of adverse selection (worker heterogeneity) can explain the underprovision of general training by employers. High-ability workers value the option to entertain outside wage offers once their abilty becomes known to the market. Offering short-term...

This article considers the consequence of incomplete contracts that arise due to difficulties in precisely describing potentially relevant contingencies. Unlike much of the literature, this article concludes that the resulting incompleteness could often be immaterial with respect to economic...

Economists presume that competition spurs a firm to be more efficient by forcing it to reduce its agency problems. This article investigates this presumption. It finds that the effects of competition on executive behavior can be decomposed into four effects, each of which is of potentially...

Product-market competition affects the benefits from providing incentives to managers. In particular, the best response to other firms providing strong incentives can be to provide weak incentives. Conversely, the best response to other firms providing weak incentives can be to provide strong...