The existing delegation literature has focused on different preferences of principal and agent concerning project selection, which makes delegating authority costly for the principal. This paper shows that delegation has a cost even when the preferences of principal and agent are exogenously...

The paper analyzes the choice of organizational structure as solution to the trade-off between controlling behavior based on authority rights and minimizing costs for implementing high efforts. The analysis includes the owner of a firm, a top manager and two division heads. If it is more...

We analyze the optimal choice of risk in a two-stage tournament game between two players that have different concave utility functions. At the first stage, both players simultaneously choose risk. At the second stage, both observe overall risk and simultaneously decide on effort or investment....

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004: The existing literature on the comparison of tournaments and piece rates as alternative incentive schemes has focused on the case of unlimited liability. However, in practice real workers' wealth is typically restricted....

Several empirical findings have challenged the traditional trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle on the positive relationship between risk and incentives can be explained.