In many organizations, reward decisions depend on subjective performance evaluations. However, evaluating an employee's performance is often difficult. In this paper, we develop a model in which the employee is uncertain about his own performance and about the manager's ability to assess him....

In this paper, we test empirically whether there is a relationship between corporate income taxes and CEO bonus payments. Using Compustat and ExecuComp data from 1992 to 2010, we find mixed results. Looking at the whole sample, the average bonus contract rewards tax savings excessively in...

Baker (2002) has demonstrated theoretically that the quality of performance measures used in compensation contracts hinges on two characteristics: noise and distortion. These criteria, though, will only be useful in practice as long as the noise and distortion of a performance measure can be...

This discussion paper led to an article in <I>Applied Economics</I> (2012). Vol. 44(32), pages 4211-4219.<P> We examine how self-selection of workers into firms depends on the power of the firms' incentive schemes and how it affects the performance of firms that increase the power of the incentive...</p></i>

This discussion paper has led to a publication in the <A href="http://www.sciencedirect.com/science/article/pii/S0014292110000978">'European Economic Review'</A>, 55(5), 630-43.<p>Incentive instruments like asset ownership and performance pay often have to strike a balance between the productive incentives and the rent-seeking incentives they provide. Standard theory predicts...</p></a>

We conduct a field experiment in a large retail chain to test basic predictions of tournament theory regarding prize spread and noise. A random subset of the 208 stores participates in two-stage elimination tournaments. Tournaments differ in the distribution of prize money across winners of the...

Gender differences in preferences regarding social relationships and competitive environments are well documented in psychology and economics. Research also shows that social relationships and competition among co-workers are affected by the incentive schemes workers are exposed to. We combine...

Using a formal principal-agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some agents care more for their principal when they are convinced that the principal cares for them. Principals can signal...

This discussion paper resulted in a publication in <A href="http://www.sciencedirect.com/science/article/pii/S0899825611000571">'Games and Economic Behavior'</A>, 73(2), 573-94.<p>We consider repeated trust game experiments to study the interplay between explicit and relational incentives. After having gained experience with two payoff variations of the trust game, subjects in...</p></a>

This discussion paper resulted in a publication in the 'Journal of Economics and Management Strategy', forthcoming.<P> Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical...</p>