We present a model in which a motivator can take costly actions - or what we call motivational effort - in order to reduce the effort costs of a worker, and analyze the optimal combination of motivational effort and monetary incentives. We distinguish two cases. First, the firm owner chooses the...

In many occupations, the consequences of agents' actions become known only over time. Firms can then pay agents based on early but noisy performance measures, or later but more accurate ones. I study this choice within a two-period model in which an agent's action generates an output with delay,...

We analyze optimal contracts in a hierarchy consisting of a principal, a supervisor and an agent. The supervisor is either neutral or altruistic towards the agent, but his preferences are private information. In a model with two supervisor types, we find that the optimal contract may be very...

Policy advocates often push for market-like performance incentives for publicly provided services such as in education or healthcare (as with Medicare in the U.S.). The evidence supporting output-based, performance incentives for such jobs is mixed at best. One possible explanation is that the...

We study a relational contracting model with two agents where each agent faces multiple tasks: effort toward the agent's own project and helping effort toward another agent's project. We first propose the two-step approach, which is useful for characterizing the equilibrium of relational...

Incentives often fail in inducing economic agents to engage in a desirable activity; implementability is restricted. What restricts implementability? When does re-organization help to overcome this restriction? This paper shows that any restriction of implementability is caused by an...

Following Oyer (2004) and Rajgopal, Shevlin and Zamora (2006), we provide evidence that the level of stock option compensation results from outside opportunities in the managerial labor market for a sample of 3,214 CEO-year observations from S&P1500 companies between 1996 and 2010. We argue that...

I analyze how a firm should elicit advice from an expert on when to terminate a project with a stochastic lifespan. The firm cannot directly observe the project's lifespan, but imperfectly monitors its current state by observing incremental output. The expert directly observes the state of the...

This article explores a dynamic moral hazard setting in which a principal hires a team of agents for a project. As the project generates revenue upon completion, the principal incentivizes agents' efforts by designing bonuses for success. If bonuses are provided through spot or...

This paper investigates the factors that make teams successful in competitive environments. In collaboration with a medium-sized Latin-American bank, we designed a series of contests among the branches of the bank, in which we varied the prize structure of the tournaments (in some tournaments,...