We consider a multi-agent contracting setting when agents have “keeping up with the Joneses” (KUJ) preferences. Because productivity is affected by common shocks, it is optimal to base pay on performance relative to a benchmark. But when agents and care about how their pay compares to...

We consider multi-agent multi-firm contracting when agents benchmark their wages to a weighted average of their peers, where weights may vary within and across firms. Despite common shocks, compensation benchmarking can undo performance benchmarking, so that wages load positively rather than...

Shareholder-creditor conflicts can create leverage ratchet effects, resulting in inefficient capital structures. Once debt is in place, shareholders may inefficiently increase leverage but avoid reducing it no matter how beneficial leverage reduction might be to total firm value. We present...