Measured individual performance often depends on random factors which also affect the performances of other workers in the same firm, industry, or market. In these cases, relative performance evaluation (RPE) can provide incentives while partially insulating workers from the common uncertainty....

This paper analyzes strategic communication in equilibrium models of conventional and final-offer interest arbitration. Both models emphasize the role of learning by the arbitrator from the parties offers about the state of the employment relationship, which is known to the parties but not to...

In previous work we showed that a model that integrates job assignment, human-capital acquisition, and learning can explain several empirical findings concerning wage and promotion dynamics inside firms. In this paper we extend that model in two ways. First, we incorporate schooling into the...

This paper studies career concerns -- concerns about the effects of current performance on future compensation -- and describes how optimal incentive contracts are affected when career concerns are taken into account. Career concerns arise frequently: they occur whenever the market uses a...

We analyze a rational-expectations model of information acquisition and price formation in an intermediate- good market: prices and net supply are non-negative, there are no noise traders, and the intermediate good has multiple potential uses. Several of our results differ from the classic...

We analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of dyads, each consisting of an upstream party and a downstream party. Both parties can make specific investments at private cost, and there is a machine that either...

We attempt to explain employment practices in internal labor markets using models that combine job assignment, on-the-job human-capital acquisition, and learning. We show that a framework that integrates these familiar ideas captures a number of recent empirical findings concerning wage and...

In this paper we provide theoretical and empirical analyses of an asymmetric-information model of layoffs in which the current employer is better informed about its workers' abilities than prospective employers are. The key feature of the model is that when firms have discretion with respect to...

We develop a model in which a worker's skills determine the worker's current wage and sector. Both the market and the worker are initially uncertain about some of the worker's skills. Endogenous wage changes and sector mobility occur as labor-market participants learn about these unobserved...

This paper surveys two related pieces of the labor-economics literature: incentive pay and careers in organizations. In the discussion of incentives, I first summarize theory and evidence related to the classic agency model, which emphasizes the tradeoff between insurance and incentives. I then...