Rank-order tournaments are usually modeled simultaneously. However, real tournaments are often sequentially. We show that agents' strategic behavior significantly differs in sequential tournaments compared to simultaneous tournaments. In a sequential tournament, under certain conditions the...

Consider managers evaluating their employees’ performances. Should managers justify their subjective evaluations? Suppose a manager’s evaluation is private information. Justifying her evaluation is costly but limits the principal’s scope for distorting her evaluation of the employee. I...

We study S&P 500 firms’ disclosure of relative performance evaluation (RPE) details in their first proxy statement filing after the effective date of an SEC rule mandating expanded executive compensation disclosures. Using theoretically-developed implicit techniques to detect RPE use, we...

Using a formal principal-agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some agents care more for their principal when they are convinced that the principal cares for them. Principals can signal...

Using a formal principal-agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some agents care more for their principal when they are convinced that the principal cares for them. Principals can signal...

In this paper I summarize four new strands in agency theory that help me think about incentives in real organizations. As a point of departure, I begin with a quick sketch of the classic agency model. I then discuss static models of objective performance measurement in which firms get what they...

This paper investigates the firm performance implications associated with the choice of individual versus group compensation schemes for senior executives below the CEO level. We define individual compensation schemes where senior executives are compensated independently from other senior...

We study behavior within a simple principal-agent experiment. Our design allows for a large class of linear contracts. Principals can offer any feasible combination of (negative) fixed wages and incentives in the form of return sharing. This great contractual flexibility allows us to study...

In this paper, the principal rewards an agent's farsighted effort both in the short- and long-term, with the short-term reward based on a noisy, forward-looking performance measure and the long-term reward based on a potentially less noisy, trailing performance measure. The main result is that...

The multitask principal-agent theory argues that incentive devices for the agent tend to be complementary due to the need for balanced allocation of effort among the tasks. A growing body of empirical literature appears to support this notion. However, when there can be several signals for each...