The fact that settlement rates are much higher where final-offer arbitration, rather than conventional arbitration, is the dispute settlement procedure is used as the basis of a test of the role of divergent and relatively optimistic expectations in causing disagreement in negotiations....

Relational contracts-informal agreements sustained by the value of future relationships-are prevalent within and between firms. We develop repeatedgame models showing why and how relational contracts within firms (vertical integration) differ from those between (nonintegration). We show that...

We show that a framework that integrates job assignment, human-capital acquisition, and learning captures several empirical findings concerning wage and promotion dynamics inside firms, including the following. First, real-wage decreases are not rare but demotions are. Second, wage increases are...

Incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures. This paper explores the combined use of subjective and objective performance measures in (respectively) implicit and explicit incentive contracts. The...

We analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of firms, each consisting of a party who can reduce production cost and a party who can discover information about demand. Both parties can make specific investments...