Why do firms delegate job design decisions to workers, and what are the implications of such delegation? We develop a private-information based theory of delegation, where delegation enables high-ability workers to signal their ability by choosing difficult tasks. Such signalling provides a more...

Recent work in the field of mechanism design has led some researchers to propose institutional changes that would permit parties to enter into non-modifiable contracts, which is not possible under current contract law. This paper demonstrates that it may well be socially desirable not to enforce...

This paper analyzes the impact of labor market competition and skill-biased technical change on the structure of compensation. The model combines multitasking and screening, embedded into a Hotelling-like framework. Competition for the most talented workers leads to an escalating reliance on...

This paper presents a contracting model of governance based on the premise that CEOs are the main promoters of governance change. CEOs use their power to extract higher pay or private benefits, and different governance structures are preferred by different CEOs as they favour one or the other...

This Paper studies a particular kind of gaming response to explicit incentives in a large government organization. The gaming responses we consider occur when agents strategically report their performance outcomes to maximize their awards. An important contribution of this work is to examine...

Consider Holmström.s moral hazard in teams problem when there are n agents, each agent i has a a(i)-dimensional strategy space and output can be m-dimensional. We show that a compensation mechanism that satisfies budget balance, limited liability and implements an efficient allocation...

In this Paper we use agency theory to study the active role of the CEO in the formulation of corporate strategy. We allow the agent (CEO) to play a role in defining the parameters of the agency problem, in an incomplete contracting model in which the agent can be rewarded based only on financial...

Arguing that consumers are the carriers of firms’ reputations, we examine the role of consumer networks for trust in markets that suffer from moral hazard. When consumers are embedded in a network, they can exchange information with their neighbours about their private experiences with...

We experimentally examine the effects of flexible and fixed prices in markets for experience goods in which demand is driven by trust. With flexible prices, we observe low prices and high quality in competitive (oligopolistic) markets, and high prices coupled with low quality in non-competitive...

We study the effects of reputation and competition in a stylized market for experience goods. If interaction is anonymous, such markets perform poorly: sellers are not trustworthy, and buyers do not trust sellers. If sellers are identifiable and can, hence, build a reputation, efficiency...