In this paper we analyze the problem of whether and/or when to replace a leader (agent) when no monetary rewards are available, and it is the leader's competence rather than effort that is being evaluated. The only decisions that the leader takes over time are whether to undertake risky but...

his paper examines how violence in the Second Intifada influences Palestinian public opinion. Using micro data from a series of opinion polls linked to data on fatalities, we find that Israeli violence against Palestinians leads them to support more radical factions and more radical attitudes...

This paper shows that the informativeness principle, as originally formulated by Holmstrom (1979), does not hold if the first-order approach is invalid. We introduce a "generalized informativeness principle" that takes into account non-local incentive constraints and holds generically, even...

Parties often regulate their relationships through “continuing” contracts that are neither long-term nor short-term but usually roll over. We study the trade-off between long-term, short-term, and continuing contracts in a two period model where gains from trade exist in the first period,...

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...

Dynamic defaults for recurring purchases determine what happens to consumers enrolled in a product or service who take no action at a decision point. Consumers may face automatic renewal, automatic switching, or non-purchase defaults. Privately optimal dynamic defaults depend on the...

This paper analyzes a model where investors use a credit rating to decide whether to finance a firm. The rating quality depends on the unobservable effort exerted by a credit rating agency (CRA). We analyze optimal compensation schemes for the CRA that differ depending on whether a social...

Accountable Care Organizations (ACOs) are new organizations created by the Affordable Care Act to encourage more efficient, integrated care delivery. To promote efficiency, ACOs sign contracts under which they keep a fraction of the savings from keeping costs below target provided they also...

I examine the interaction between present-bias and limited memory. Individuals in the model must choose when and whether to complete a task, but may forget or procrastinate. Present-bias expands the effect of memory: it induces delay and limits take-up of reminders. Cheap reminder technology can...

This paper presents direct evidence for relational contracts in sovereign bank lending. Unlike the existing empirical literature, its instrumental variables method allows for distinguishing a direct influence of past repayment problems on current spreads (a "punishment" effect in prices) from an...