If agents are exposed to continual competitive pressure, how does a short-term variation of the severity of the competition affect agents' performance? In a real-effort laboratory experiment, we study a one-time increase in incentives in a sequence of equally incentivized contests. Our results...

Trust between parties should drive contract design: if parties were suspicious about each others' reaction to unplanned events, they might agree to pay higher costs of negotiation ex ante to complete contracts. Using a unique sample of U.S. consulting contracts and a negative shock to trust...

This paper reports on the results of an experiment testing whether the agents selfselect between a competitive payment scheme and a revenue-sharing scheme depending on their inequity aversion. Average efficiency should be increased when these payment schemes are endogenously chosen by agents. We...

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...

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...

I study the implications of agency frictions for the pricing policy of institutional market makers. In a setting where a market maker cannot observe the actions of an employed trader, I derive the optimal compensation structure and pricing policy. The theory demonstrates that incentive...

This paper investigates the effects of the Sarbanes-Oxley Act (SOX) on CEO compensation, using panel data constructed for the S&P 1500 firms on CEO compensation, financial returns, and reported accounting income. Empirically SOX (i) changes the relationship between a firm's abnormal returns and...

This paper investigates the effects of regulatory interventions on contracting relationships within firms by examining the impacts of the Sarbanes-Oxley Act (SOX) on CEO compensation. Using panel data of the S&P 1500 firms, it quantifies welfare gains from a dynamic principal-agent model of...

We study incentive contracts in asset management business under dynamic actions and relationships between an investor, a partner of an investment company, and a fund manager of the company. The investor cannot perfectly observe the partner and manager’s actions, and similarly, the partner...

Principal-agent problems are pervasive in economic settings. CEOs and shareholders, lawyers and clients, manufacturers and retailers, lenders and borrowers are all examples of settings in which moral hazard problems might arise. Incentive contracts in both individual and team environments have...