We address the question how much authority a principal should delegate to a manager with conflicting interests and uncertain ability in a context in which the manager has both compensation-based and reputational incentives. The optimal level of authority balances the value of the manager's...

Using the concept of Inequity Aversion we derive in a Moral Hazard setting several results which differ from conventional contract theory. Our three key insights are: First, inequity aversion plays a crucial role in the design of optimal contracts. Second, there is a strong tendency towards...

We develop a two-sided matching model to analyze collaboration between heterogeneous academics and firms. We predict a positive assortative matching in terms of both scientific ability and affinity for type of research, but negative assortative in terms of ability on one side and affinity in the...