Using an agency model, we show how delegation, by generating additional private information, improves dynamic incentives under limited commitment. It circumvents ratchet effects and facilitates the revelation of persistent private information through two effects: a play-hardball effect, which...

We study the optimal hierarchical structure of an organization under limited commitment. The organization cannot make a long term commitment to wages and output levels, while it can commit to its hierarchical structure. We show that the optimal hierarchical structure is horizontal when it is...

Using an agency model, we show how delegation, by generating additional private information, improves dynamic incentives under limited commitment. It circumvents ratchet effects and facilitates the revelation of persistent private information through two effects: a play-hardball effect, which...

In a principal-agent framework, we explain different managing styles. In our model, there are two vertical tasks -- an upstream task for improving the project's potential environment, and a downstream task for implementing the project. The downstream task must be done by the worker, but the...

This paper provides an economic rationale for overachieving behavior in non-professional activities in the labour market. The intrinsically motivated worker uses his achievement in the non-professional activity to signal his work ethic. When the worker‘s career concern is weak, he exerts no...

In an agency model with adverse selection, we study how hidden interactions between agents affect the optimal contract. The principal employs two agents who learn their task environments through their involvement. The principal cannot observe the task environments. It is important to note that...