This paper examines the effect of imperfect labor market competition on the efficiency of compensation schemes in a setting with moral hazard and risk-averse agents, who have private information on their productivity. Two vertically differentiated firms compete for agents by offering contracts...

This paper examines the effect of imperfect labor market competition on the efficiency of compensation schemes in a setting with moral hazard and risk-averse agents, who have private information on their productivity. Two vertically differentiated firms compete for agents by offering contracts...

Empirical and experimental papers find that high-powered incentives may reduce performance rather than improve it; a phenomenon referred to as "choking under pressure". We show that competition for high ability workers nevertheless leads firms to offer high bonus payments, thereby deliberately...

This paper analyzes the implications of currency crises in a model with unique equilibrium. Starting from a typical multiple equilibria model with self-fulfilling expectations we introduce noisy information, following Morris/Shin (1999). Under certain conditions for the noise parameter, all...

This paper studies optimal risk-taking and information disclosure by firms that obtain financing from both a relationshipʺ bank and arm’s-lengthʺ banks. We find that firm decisions are asymmetrically influenced by the degree of heterogeneity among banks: lowly-collateralized firms vary...