High-performance work systems give workers more discretion, thereby increasing effort productivity but also shirking opportunities. We show experimentally that screening for work attitude and labor market competition are causal determinants of the viability of high-performance work systems, and...

In Bartling, Fehr, and Schmidt (2012) we show theoretically and experimentally that it is optimal to grant discretion to workers if (i) discretion increases productivity, (ii) workers can be screened by past performance, (iii) some workers reciprocate high wages with high effort, and (iv)...

Employment contracts give a principal the authority to decide flexibly which task his agent should execute. However, there is a tradeoff, first pointed out by Simon (1951, Econometrica, 19, 293-302), between flexibility and employer moral hazard. An employment contract allows the principal to...

The paper shows that an increase in competition has two effects on managerial incentives: It increases the probability of liquidation, which has a positive effect on managerial effort, but it also reduces the firm’s profits, which may make it less attractive to induce high effort. Thus, the...

Economic experiments interact with economic theories in various ways. First of all they are used to test economic theories. However, they can neither confirm nor falsify them in a strict sense. They rather inform us about the range of applicability, the robustness and the predictive power of a...

This paper analyzes a finitely repeated bargaining game with asymmetric information. It gives a tight characterization of the equilibrium path and the equilibrium payoffs of all sequential equilibria satisfying a weak Markov property. The method used allows for arbitrarily many different types...

The paper analyzes reputation effects in perturbed repeated games with discounting. If there is some positive prior probability that one of the players is committed to play the same (pure) action in every period, then this provides a lower bound for her equilibrium playoff in all Nash...

Many high technology goods are based on standards that require several essential patents owned by different IP holders. This gives rise to a complements and a double mark-up problem. We compare the welfare effects of two different business strategies dealing with these problems. Vertical...